The most critical part of buying stocks at a discount is to have the right mindset.  Now I know that may sound like a bunch of psycho-babble at first, but I assure you it is critical.  Let me explain.

Most investors just rush out and buy a stock because they heard a story, no doubt an exciting story, and they can’t wait to buy the stock.  They are mentally focused on how much higher they think the stock price will go because, well, it’s been going up fast so far.

So price is not much of a consideration with them.  They want to get into the game – right now.  They are excited because they just heard about this thing.

They may have heard about it on the evening news.  And guess what types of stocks the news reports on?  Well, the major media is always into drama to increase their ratings, so they always report on exciting stocks.  That is to say stocks that have risen dramatically in price, and also stocks that have dropped dramatically in price.

Their mindset is to go with the stock that has gone up, a winner as they perceive it, and to avoid any stock that has gone down, a loser as they perceive it.

So what did they just decide to do?  They decided to buy high and sell low, or at least that’s probably how it’s going to work out in the end.  But isn’t that backwards?  Don’t we want to buy low and sell high?

When we go to a store to shop, do we look for merchandise that is the highest priced or do we look for merchandise on sale?  The way most investors buy stocks, it’s like they walked into Lord & Taylor Department Store and asked the clerk to show them the merchandise with the absolute highest markup.

Strange isn’t it.  But true.  As I write this article this is going on with Apple stock and Facebook stock.  There is a frenzy of public sentiment to own these stocks.  They are getting a lot of press and the buying public is all pumped up.

Now in the case of Apple, it may indeed go up, but why not wait to buy when the price has pulled back.  And in the case of Facebook, well, I have my doubts.

But regardless, let’s resolve to not rush out and buy stocks because they have just set a record on price and we are excited.  Let’s keep a cool head about this.  Let’s resolve to be more disciplined and buy quality stocks when their price is down.

And that is Mindset idea number one – the Cool Mindset.  There is nothing hard to understand about this.  But it takes discipline and constant self-reminder.

To your health and prosperity – John

P.S. If you think you can do the cool mindset, and you’re just getting started, you may want to check out my latest book Stock Investing For Beginners.  It’s a fast easy read, and by the end of the book you will know how to buy your first stock.  You can look through it for free right here.