Most of us fall in love with an asset (a stock, index, bond, real-estate, crypto, etc.) or a strategy/technique of investing instead of what the asset/strategy can do for us (enable us to make more money to build a prosperous future: send kids to better college, set aside more for a better retirement, more money for a down-payment, pay off house earlier). Think about it: Would you fall in love with power-tools instead of the time you will be spend with your family in the dream-house that you are building? Ridiculous, no? But it happens far more commonly than we all let on.
This happens because of dogma - we just strongly believe that investment in a particular asset is the best thing around. Think about the breathless commentary about crypto investments now (or, dot-com stocks during the late 1990s). Once you buy an asset, by the way, "confirmation bias" creeps in (we tend to see things we do in positive light) and reach for information/news that supports our decisions and ignoring or suppressing news that contradicts our beliefs.
If you are victim to this, don't feel bad - it happens to all of us. An example: You buy stock for a company A. It goes up and you are happy. Then, it starts going down, down, and well below your purchase price. Suddenly the confidence you once enjoyed is shaken. When the stock recovers above your purchase price, you sell with a modest profit. Phew! A little while later (since this stock is on your watch list), you see that this stock has now doubled in value since you sold. "Gosh! I should have held on," you say to yourself mentally kicking yourself. When it comes back down a bit, you buy again convinced it will go up still more. I call this the "curse of the watch list."
Every time you are ready to deploy capital, the entire range of investments is available to you - not just what is in your watch list, or what is dictated by your favorite strategy. It's like starting all over again. All you have to ask is "Where is my capital BEST DEPLOYED?" Have concrete valuation criteria, do your research and execute. If you are buying a stock, sector ETF, or purchasing a fixer-upper to fix and rent/sell. Whatever. Do your homework. What are your assumptions? Are they grounded in fact or opinion of talking heads? When you are ready, purchase at a fair price. Above all, don't panic.
Submitted July 06, 2018 at 11:44AM by arnexa https://ift.tt/2MR7AtA
