The phrase ‘Scared money don’t make money’ is used in many ways by diverse people from the Hip Hop community to the trading and investing world but what does it really mean?
People that are too afraid to take on risks in business, life, and financial markets are unlikely to make money because rewards only come from taking risks. If you take no risk on your capital there will be no returns on your capital.
Even if a person wants to invest or trade their money they can be very afraid of losing it. A person has to be able to put their money on the line for their beliefs in a company or a trading position to even have a chance to make any money.
Ten reasons why ‘Scared money don’t make money’:
- The fear of taking action can cause you to do nothing, you can’t make money through inaction.
- Being afraid to buy a dip during an uptrend will cause you to miss the opportunity to enter at a good risk/reward ratio and catch a swing trade back up.
- Being too scared to buy a breakout in price at the beginning of a new trend will cause you to miss a trend.
- The fear of having an open winning trade turn into a losing trade will make you lock in a small profit instead of letting your winner run for a big profit. Most winning systems need big wins to be profitable.
- Too much fear of losing money will lead you to not put any money at risk for the opportunity to make money.
- Ironically, FOMO or the fear of missing out can cause you to enter a trade too late near the end of a trend and lose money because of your timing. This is one of the only fears that cause action that makes you lose money.
- The fear of being wrong about a trade or investment can paralyze you into not doing anything. This is an ego problem focusing on yourself and not on a process of system.
- A fear of a large drawdown in your capital can leave you staying too conservative to make much money.
- Most fears arise from a lack of faith in your method or a lack of faith in yourself to execute your process with discipline.
- Too much fear of failure can lead to never starting any profitable venture to make money. You have to risk what you have for a chance to get something you want more.