A lot of people must feel horrible looking at their portfolio during this period including myself. Every month there has been lots of tensions among the countries and no one really knows when the situation will improve. With investing, the macro-environment and various news can affect our portfolio which can range from different products.
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Not looking at investing as long term
One of the reason is not looking at investing as a long term thing. If you bought maybe a few months ago in 2022 or earlier in 2021, your portfolio might not be looking green with profits and I guess everyone’s portfolio has been hit as asset prices have been dropping.
Some might have got into investing in 2020 or 2021 hearing the short term gains that many were sharing as it was an uptrend market and whatever you bought would turn green the next day. However, to be in the market for the short term means that you have to be agile, have substantial capital for trading to cover the cost and effort for monitoring but does it mean that you will definitely profit by trading?
It is not easy to predict the market in the short term and I am sure it is tedious to be monitoring consistently. If you are interested in investing, you would know that companies will need time to grow or if they give dividends, would also need time to compound to allow a substantial growth.
When we start investing, we don’t usually go in with a lump sum as we would test the water with a smaller amount and also because we are looking to grow and build it up over time so then this would require discipline to be consistently adding or allowing that amount to snowball in the long run. Know that the market will be choppy in the short term but rewarding in the long term although past results does not mean future results.
Hearing from people and buying due to hype
I think this happens more often in a bull market. And I have seen this and experienced it myself. During a bull market, almost everything and anything would be going up so many people would speculate and try to find out what can give them the best returns. But not every stock would be able to do that over the long term and once the hype is over, the stock would drop and everyone will panic sell it.
Sometimes, even after you have done your research, the results might not be reflected on the stock performance. Of course, if you have done your research and is convicted then position sizing is also important depending on various factors (eg. risk and portfolio allocation). During the good times in 2020 and 2021, everyone around me was asking and talking about buying stocks and crypto, many of my friends were putting money in and they were telling me how much profits they had.
It is important to have your own plan and not buy whatever people are mentioning unless it is something that you have researched and want to initiate a position in. If you were to buy everything that was suggested to you, your portfolio will look super messy and the main thing is that you wouldn’t even follow up on all the counters over time. Consider an index ETF if you are not interested in researching individual companies.
Letting your emotions get the better of you
If you see a stock price drop every single day as it is right now, some people tend to panic and sell especially when they see others selling however the current situation is that the whole market is reacting to news and almost everything is down. As long as the business has no major changes that is detrimental to it’s growth or business direction or the drop is due to macro environment then there is no need to sell but instead to slowly add on.
If you want to take profits or cut your losses then that is definitely ok. The thing is not to panic sell and having to enter again at a higher level. This can also happen in the opposite side where you are recklessly buying as the market goes up. Keeping your emotions out of investing is good and hence automating and DCA will work for most including me.
Have a plan and stick to it though be flexible
Keep to the plan and know why you started investing in the beginning. The lure of suddenly striking it rich in a short time sounds amazing but investing is long term, slow and steady wins the race.
Plans can change but do try to stick to it and adjust accordingly when you have build up the foundations or have went through it for some time. Some times, changes are needed along the way and you can decide accordingly.
I have been allocating my pay-check in terms of savings, investing, expenditures and make sure that the amount goes to the relevant accounts to ensure they serve their purpose. In the beginning, I tend to tweak the amount as I monitor my spending habits but once you have a comfortable amount, fix it and continue with the allocations. For most of us working a 9-5 job, our income is fixed and so automating it should not be a huge problem.
Even "experts" lose money
No one knows where the stock market is really headed and even the experts can only make a prediction based on data or what usually happens due to a certain event however it is not 100% right all the time.
Learning from your mistakes along the way will help and that is why many advocate to start investing early so that your runway is long and you can afford making mistakes when your initial capital is not that huge. We might be in unprecedented times but hopefully the world can recover and we will be on track to reaching new ATHs again. But that will take time and in the meantime, accumulating and building up your skills as well as assets will prove to be valuable.
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Let me Teach you why people lose money in stocks. I rarely teach people, but i like you, girl, so i tell you how to be good at Investing. People lose money in stocks because of One Simple Reason: They Bought At The High. Second Reson: They Stupid.
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