It's saturday night and I'm sitting home alone with only some secondary applications to keep me company. I write this entry as I stare at this screen and look over my finances over the past two months. Obviously I'm procrastinating.
But I do have a serious confession to make. I suck at investing. I could have merely stated that I don't know anything about the market, that I'm still learning about money, or that I just haven't found the right investment. All could be very true, but all would have missed the point.
I'm terrible because I haven't yet mastered discipline -- the act of keeping my emotions at bay. Over the past nine months, I have found myself obsessively pouring over the ticker for a few days and then ignoring the whole thing for weeks, only to start the process over again. When my portfolio is up, I smile for a while, only to quickly dismiss success and focus on the next time it will go up. When it is down, I sigh and debate whether I should listen to the devil on my left and sell out, or listen to the devil on my right and ignore the market.
No more! Roger Federer has demonstrated that keeping focus on the task at hand is crucial to playing perfect tennis. He manages his schedule, lets nothing distract him, and hones every aspect of his game. So must I learn to do in investing, if I ever hope to become a true investor.
It is easier to just invest in the S&P 500 and let the market decide where it will go. It'll do that anyways. But that's too bitter of a pill for me to swallow right now. I am determined to learn to control my money, to make it do what I want it to do. How can I learn to do that if I just stick it to a fund and forget about it for the next 40 years? I still believe that it's possible to make money no matter what the market does. After all, I've already learned that I can lose money regardless of where the market is at.
So I acknowledge my faults first, in an effort to improve. I hope that, by examining my actions in excruciating detail, I will be able to learn from the past and build up my defences. Who knows? Maybe I'll even reach my holy grail and learn to make a profit whenever I want to.
September 09, 2006
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5 comments:
Did you ever read Half Asleep in Frog Pajamas by Tom Robbins? It is a diary of a female broker during the '87 scare. This could help you to ease up on yourself.
I wold say that you are the typical young investor. And, yes, the typical young investor is not very good. The typical investor feels good when the market is high and can't resist adding to their portfolio. When the market goes down, the typical investor wants to cash out and be done with it. This is called buying high and selling low and it will kill your long term goal of building wealth. Find good, solid investments and put your money in them. Don't pay so much attention to the market on a daily basis. Let the market take care of itself.
Yeah, it's tough to keep emotions out of it. Believe it or not, scientists ran an experimental "investing" game with regular people vs people who suffered brain damage to the part of the brain that controls emotion. THe "brain damaged" people kicked butt.
I used to be the worst investor out there. But now I don't listen to stock tips, do my own research and follow my guidelines (good stocks selling at a cheap price).
If you can, find Seth Klarman's (out of print) book from the library. It's great. I also recommend Joel Greenblatt's books. Both were fund managers with really good records. Marty Whitman and Peter Lynch are also legends who wrote books telling people how to do it. Most other investing books aren't worth the paper they are printed on.
If I were qualified to give advice I'd say invest in Vanguard funds or ETFs that follow the total market - or the Wilshire 5,000. They have very low expenses, which will compound quite a bit in 40 years.
I understand wanting to be control. I used to be a day trader. It's may seem like you are in control, but you can't be in control of the market. One thing you could do is adjust your portfolio sector-wise. When energy is expensive as it seems it was just a few weeks ago, perhaps you cut down on the investment there and put more money into something that isn't as expensive. Real Estate Investment Trusts have also returned good gains over the last few years.
There are few Roger Federers in the world. One should study and practice before jumping into Wimbledon. The good thing is that there are number of web sites out there that will let you practice your game. I suggest you give it a go for at least 3 years. If you are good, you have another 37 years to be the Roger Federer. If you are 1/100th as talented in investing you'll probably retire within 5 years of that.
I'll have to show ya some great dividend plays to bring in a steady income with great potential for price appreciation.
Take a look at large caps who are either number 1 or 2 in their industry (tech, financial, health care, etc.) ..should do well until 2010.
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