One of the easiest way to explain this is: You have no control over your actions.
"We all know we need to do this, but we just couldn't do it."
Does that sound familiar to you?
You know there are right things to do, but you just can't get yourself to do it!
You know you should save some money each month for the rainy days, or even invest, but you just can't stop spending on dinners with friends and buying new shoes!
When it comes to investment. You know you need to buy low sell high! but this stocks looks like it's going to go up another 50% at least!
The most difficult thing to do for most people, is discipline; and that's why most people have no control over their finance and their life.
Why is it so damn difficult to just do the things that are good for us?
The simple answer is that: "We're Human."
When I say we're human, I meant that we're simply emotional beings.
We act by our emotion most of the time, instead of logic.
We make decisions based on a long chain of cause and effects that put us in the emotional state to make that decision at that place.
In another word... we have no control over our decisions most of the time.
So, does that mean that Rich people are born that way? and the poor will stay poor, and there is no way we can change?
No, We can change...
In reality, rich people stay rich and poor people stay poor most of the time.
One simple reason is that we are very resistant to change.
It would take huge amount of effort to change just one person, by a tiny bit; But! we can!
One way to change you, is to use the environment!
Little that we know, we make many of our decisions based on the environment we're in.
The old say:
"If you hang around in the barber shop long enough, eventually you're going to get a hair cut."
That is the power of the environment.
If you set yourself up in an environment that promotes changes, you are capable of change.
Imagine this, you are trying to lose weight.
It is your 1,000th times to try and lose 5LB for the beach.
Your home is filled with junk food like potato chips and soda.
It's on your computer desk, your dinning table, your couch, and you can reach for cheese balls when you wake up on the bed.
You hang out with friends who loved junk food and beer just as much as you are, and the only thing you and your friends exercise are your rights to be fat and ugly.
How likely are you to lose weight?
Probably not very likely....
In another scenario, you decided to change your environment. What would happen?
You get rid of the junk food, beer, and soda in your house.
You hang out with friends who hated junk food and love to exercise.
You have to walk a mile to get to a deli for junk food.
You make it difficult to get junk food when you crave it.
Do you think you would have a better chance of actually losing a few pounds?
Another reason you can't change is: You Don't Believe!
Why can't we do what we plan to do?
Very often, it is because we don't really believe what we plan...
Let's use our dietary example again!
We're planning to workout 5 times a week, and lose 2 LBS each week.
When we work out for the 2nd time, we're starting doubt ourselves, is this really going to work? I haven't lose a single pound yet, this is not going to work...
So what happens next is that you give up your 3rd, 4th, and 5th times altogether...
If you keep working out, It is very likely that you can lose 2 pounds. Because of our short sightedness, we always abandon our goals prematurely.
On the other hand, if you know you can lose the 2 pounds by going to the gym 5 times a week, because you have done it before, and you saw your friends done it.
What do you think will happen next?
You workout each day, until you reach that dietary goal.
You have no doubts, because you have done it.
You don't have to guess when you're going to get some results, you know you can see the result 1 week later.
Let's come back to investing.
In investing, it is almost completely the same.
When you invest, you're not sure if you're going to get any results out the investment. The stock drop by $1, and you begin to doubt your judgement.
You doubt that you have made the wrong choice, and you lose confident over the stock that you've researched for months.
One day later...
It dropped by another $1, you started to doubt your decision even more.
You decide to sell the stock now, and buy back when it gets lower.
Right after you sold your shares, the stock rebounded by $3 and soared to a new high.
You only have yourself to blame.
When you invest, if you know, you're going to get these results, would you have any doubts?
No, because you know when certain conditions are fulfilled, the probability of making a profit is really high. Therefore, there is no doubt.
You hold the stock when it drop by $1, $3, or even $5.
In fact, you actually would purchase more shares. The reasoning is that when it is a good stock to buy before, wouldn't the stock be a even better buy when it is $3, or $5 cheaper?
Why would you even think about selling the stock?
A good value investor should think about what kind of condition we should sell a stock, BEFORE we purchase it.
In my humble opinion, the only reason we should consider selling a well researched stock is when the company is no longer great.(Not some negative news about the company)
What do I mean when I say the company is no longer great?
I have a detailed article explaining this, you can refer to the link: here