There is a kind of psychological satisfaction that you get when you buy a company’s stock now and in the next hour, it has appreciated by 12.5%. You feel intelligent, you trust your judgement more and excited to make another judgement call.
Depending on your purpose for buying the stock, you can either sell it immediately and realize your gain or hold it for long, say greater than 5 years. For the person who bought the stock to sell upon some marginal gain, it makes a lot of sense for them to keep their eyes glued to the screen watching the up and down movement of the stock. On the other hand, it is a great folly for the person who does not intend to realize the gain to also keep their eyes glued to the screen.
I have been given to this folly, that is why I am writing about it. Calling your attention to it so you don’t have to also and if you have, just as I am working on stopping, you would work on stoping as well.
Sometimes, in September, I became fully invested, i.e., I have invested all the cash that earmarked to be invested in the US stock market. So I uninstalled the investment apps on my phone. I did that so that I wouldn’t find it easy to check how my portfolio is doing. So I won’t be given to the folly of always checking the daily movements. Sometimes we have to do that. Here are what I learnt:
It is an unnecessary burden and unproductive behaviour
After checking your portfolio or stock performance for every hour of the day and every day of the week, I wonder what good it did you if it was up 40% today and down 20% tomorrow? You have invested for the long term and these are great companies that won’t go bankrupt overnight so why the watch?
As I mentioned before, if your goal is to take profit and move on, you are justified to keep checking movements, that won’t be folly on your path. But if the goal is to hold for 5 years or let’s even say 1 year, tell me, what is the difference between 10% up today 30% down tomorrow and 40% up another day on and on like that when at the of your holding period what you find in your balance is $1,000 appreciating to $1,350?
At best, you have only burned yourself unnecessarily throughout the periods. When you could just have unlooked and open at the end without any mental anguish. You will smile for having made such gain and move on. That’s what I want and wish for you.
It’s self-inflicted emotional torture
We don’t process loss well as human. Our design is optimized for winning, a linear path and not zigzag. That’s why we would do anything to avoid failure even if it means not attempting a thing. Embracing failure is antithetical to our wiring. So whenever we see a 10% rise in an hour and by the next we see a 12% decline, we suffer emotionally. Which is very unnecessary.
That’s what I don’t want you to go through. Why should you suffer that? Why should you torture yourself that much? It is enough for you to deal with all the ups and downs in your daily life. The stock market shouldn’t add to it. You shouldn’t deliberately add to it either.
As humans, we are not as wired to embrace failure. We detest it. I said from the beginning that a form of psychological satisfaction happens when you make some 10% gains within the hour. But what would happen if by close of trading day that 10% have turned to negative 5%. You can’t tell me you will remain the same. Your psychological framework will have to assume a new feeling for that. That feeling is emotional torture that you don’t deserve.
The nature of the market is zigzag, not a straight line up. However, for any good asset, what happens to them is that they make higher lows. That is, even though they decline, they are declining to lower prices that are higher than the previous lowest price that they declined to. Higher lows are good and it’s a sign of a growing asset. What I want you to avoid is having to witness the zigzags as you are not wired to handle such zigzag properly.
I did this in the past and I paid for it painfully. Reminiscing on the past helped me to put this into perspective.