What’s every investor’s biggest enemy? Greed! Let me address this with a pointer to the stocks markets. Whether you’re a beginner or experienced in stocks, one thing that can ruin your progress is letting greed lead your decisions.
Greed is one of the most dangerous emotions an investor can bring to the stock market. It often leads to chasing quick profits, overtrading, ignoring risks, and ultimately making poor investment decisions. While the market offers many opportunities to grow wealth, staying grounded and rational is key.
So how do you avoid greed in the stock market in practical, relatable, and rooted in experience… Here’s to the first tip.
Have a Clear Stock Investing Plan
Avoiding greed starts with a plan. When it comes to stocks, don’t just “buy and hope.” This plan should at least include the following;
Defining your objectives – Determine if you’re investing for long-term growth, dividend income, or a mix of both. Establish clear, measurable goals such as target annual returns or portfolio milestones.
Risk Tolerance and Capital limits – Assess how much capital you’re willing to commit to stocks and what level of volatility you can handle. Decide on position sizes, ensuring that no single stock represents an outsized portion of your portfolio, and maintain a diversified mix across sectors or market capitalizations.
For instance, you can decide that by end of 2025, you want to have a Stock portfolio of Sh500,000. Within this Sh500,000, you determine the portions of each stock that you would want to invest in, e.g. Safaricom – 30%, NCBA – 20%, Equity – 10%, SKL – 20% and BAT – 20%.
These are just examples.
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Set entry and exit prices – Before buying, determine your entry points based on technical or fundamental analysis. Equally important, establish exit criteria whether it’s reaching a profit target, a change in fundamentals, or breaching a predefined stop-loss limit. You could decide that you want to exit Safaricom counter if you own it at Sh25 bob, given maybe you entered at IPO (5 bob) or at Sh15 bob, or Stanchart at Sh300 and you bought it at Sh160 bob.
Or work with percentages which give clearer outlooks. Say you want a 30% gain and get off the train.
Regular Review and Adjustments – Set a schedule to review your investments. This helps you adopt to market changes, reassess your strategy, and ensure that your portfolio remains in line with your goals and risk tolerance. You could decide to do a weekly or monthly reviews or set notifications on your trading app on counters you’re following or interested in to help you make some decisions on adjustments. Or even work with a licensed stock broker or Financial advisor to keep you updated on market happenings
When your stock investing plan is clear, you stop making emotional decisions and start making strategic ones. Greed loves guesswork. Discipline loves a plan.
Rhina Namsia is the founder and chief executive officer of The Acemt Consulting, a training and consultation company that provides financial planning and investment advisory.
