Asked by Anonymous
Updated on 18 Apr 2019
Even though I know my horizon is in the long term, I cant help feeling stressed/flustered whenever I see a few percentage points swings esp in the red. I get the urge to make trades fast but I resist even though I know S&P long term avg growth is still 7%. Just curious how you guys cope with this in your personal capacity.
I think like what Billy has mentioned, just remind yourself why you bought into this company in the first place! To help you deal with the psychological anxiety, perhaps you can look if there are any major market news that might have potentially caused your stocks' prices to drop. If there isn't any significant market moving events, then there is not much compelling reason for you to sweat over it.
From my own experience, I own a small position in this small cap stock listed on the NASDAQ called Electra Meccanica and the price can fluctuate up to +/-8% per day. However, I cope with this swings by staying firm to my belief that this stock has long term growth potential (which was why I bought it in the first place).
Hope that helps!
Since you say your investment horizon is long term,
Always remember why you had the conviction about the stock.
For me, if none of the underlying factors for why I had the conviction has changed, then I might go and understand the reason for the dip. If it's something that I am not concerned about, I won't keep eyeballing the stock price on a daily basis.
Just wondering, is your entire portfolio in red or just a few investments?
I’ve actually 1-2 investment that are like 30-40% down. But my overall portfolio is ok. After checking, company is actually sound, just that I bought it while it was overhyped & overpriced (I didn’t learn enough yet at that point)
Originally, I was quite panicky at well, but soon learnt to ignore it. Of course it does help that the rest of my investments are doing fine. Diversification really does help.
If you are sure the mechanics of the company is ok, then stop checking the stock prices every single day, it’ll help to reduce the stress. This is a “out of sight out of mind“ approach. However, remember to keep an eye out for any news of the company.
One other point is to compare with the rest of the market. If the rest of the market is down. Don’t expect your investment to be up. Just like exam results in school, you always compare with the top kid in class. If their grades drop, you won’t feel too bad if you grade drop a little, right.
Lastly, it'll also helps if you adjust your attitude toward stocks. Before you buy, you need to take a kiasee approach, check this, check that. But at the point you are about to press that “trade” button, you need to be mentally prepared to lose that amount. (So don’t bite off more than you can chew) — just talking about attitude here. I don’t mean you should just let your investment free fall to 0
This is just my personal opinion on how I cope. Hope this helps you.
I believe in every investment decision I make, it must fulfil 3 criterias:
The reason why I placed my money on this, instead of another. i.e. I made this investment to form part of my fixed income portion of my portfolio.
How much am I willing to lose, am I willing to lose everything in this or a certain percentage and does the risk-reward ratio make sense?
When do I liquidify my investments? How long do I plan to hold it.
These 3 factors gives me sufficient consideration to come up with an investment plan. Especially when dealing with different types of investments. If any of the investment turns red, I re-visit these 3 factors to see if they still make sense.
Hope it helps.
I would just remind myself why I bought into the company in the first place. As long as fundamentally, the business still has a strong balance sheet and I know the probability of it going bust is slim, then I'd just brush it off and await for more opportunities to purchase more to average down
Since you are investing for the long term, why don't you just stop logging into your account everyday and not look at the daily P/L? Look instead to rebalance your portfolio every quarter or so, unless you are in pure equities.
For me I'm used to seeing red in my ledger but I chalk it off to short term issue. I don't cut loss but find a way to fix the red in my portfolio for profit when the contracts expire (running an options portfolio). Hope this helps