When you are investing in the stock market?

why are you told to remove emotion from your investments, surely this is why life is becoming more stressful

people have emotions in everyday life and if you remove emotion then you are in danger of over reacting, for instance a stock jumping when the company announces it is to sack 5000 people

(you dont know who it is sacking, they could be sacking the best 5000 or just picking names out of a hat??), surely this is not 'ethical' investing

but everybody has different levels of emotion, so if you say 'remove emotion from your dealings' this means a different thing to everybody

This question belongs in the Philosophy section. Investing is about making money. If you confuse the two, then you are asking for trouble.

Facts = money, and money is what investing is all about. Cold, hard, unemotional cash.

It is all based on the theory that the stock market is entirely efficient. That means that, one you remove insider trading and "special knowledge", the market is perfectly efficient instantaneously adjusting to the correct level upon release of any relevant information. Stock price is based on the market perceived expected future gains of the company. Sackings do not necessarily increase a stock's value; it depends on how the market perceives the action's effect on future earnings. For example, if the redundancies are perceived as being a means of reducing costs whilst not affecting the company's ability to generate revenues, the stock price will automatically adjust to the increased future returns. If, on the other hand, the redundancies are perceived by the market as a last ditch attempt to save an otherwise floundering company or are perceived to hinder the comapny's ability to generate future revenues, the stock price will decrease. Investors remove emotion from their investment because they are simply share holders rather than employees of the company and, as such, are interested in the returns rather than any "social issues".

the mainly reason why people invest is to make a profit out of that investment.

well, the main reason you invest is money. however investing in stock can be considered as a hobby. there are so many theories with different belives about the market. for instance,

Markowitz Portfolio Theory:

he assumes that everyone like return and no one likes risk, so here you go, he give a sloution, you can find ou out what stock to invest in to minimise the risk by minimising the coeffient variance.

Jame Tobin:

Extended Markowitz work based on mixing the best you can get from the perviouse theory with a risk free-asset. it will give you a supper-efficient return.

CAPM,
measures return ER and risk beta (unsystematic risk), there so many assumption behaind this. some unrealistc ones as well. e.g tehre is perfect competion in the market.

ER= Risk Free rate + (Avg Market return - Risk Free rate) 脳 尾

this simple formula helps you to find how much you will earn for the next peiod.

if you used these theory then you can keep your emation too, coz you understand what you are doing. of course if you are an investor you just want to use the arbitage of market and you wouldn't be keeping your money in one portfolio for a long time or just invest in an individual security.

But if you are investing in an indvidual security and concered on social responsiblities you better not waste your money and time, as this has been rejected by all the professionals and academics.

thanks

Riiigghhttt . . .