The rule of sound investing is simple. Buy low and sell high. Unfortunately most investors do the exact opposite. Emotions run against this most simple of rules.

When you watch your investments plummet it is hard not to react. As that $10 bargain that you purchased falls to $6.50 your stomach turns and the impulse to sell and cut your loses grows.

You are not alone. A major market force is investor sentiment and emotion. Those investors that make the big money don't play into this emotional game.

Successful investing takes a certain amount or risk tolerance and the fortitude to stomach market downturns. By its very nature the market swings up and down. Recently we have seen market downturns and corrections. Many investors have lost a great deal of money.

The reality is that when an investor purchases a stock the gain or loss is on paper until the investor sells that stock. These investors that have lost a lot of money sold at the market's downturn. They let emotions rule their investment decisions.

Historically after every major downturn the market rebounded to hit new highs. A savvy investor may even purchase during the depressed market and take advantage of the lower cost of the securities. When the market is down securities are on sale.

I have had moderate success investing in individual securities. I consider it a hobby; buying the stock of certain companies and taking risks. I invested shortly after the bear market proceeding September 11th and averaged an increase of 50-60% in my portfolio when I finally sold. More recently I purchased shares of a China Internet Stock during the recent downturns and realized gains of around 350% when I sold last week.

The most important rule of the investing game is buy low and sell high. Don't be swayed by emotion to break this rule.

Learn more about this author, Daniel Xiao Wang.
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