Remove The Psychology From Investing
Tue Sep 25, 2007 6:26:24 am by DustinFiled under Finance, Tools and Tricks, a little about life, General
At work, I get my news from a fancy tool called iGoogle. This lets me add widgety items like news headlines to my personalized Google homepage. This is also my homepage in Internet Explorer on the three computers I use regularly: work, home - laptop, and home - desktop.
I had a problem with this though. I had a widget on there for stock quotes: things I owned and some watch list items. My project at work is basically a custom website, forcing my to open and close IE frequently all day. This made me constantly aware of the price which my favorite companies were trading at.
This became worrisome over the last few weeks as prices were falling quite quickly. As a long term investor who does not time markets all this can do is make you think and think about how far they will go down. You begin to second guess your choice in these companies. Your next step is to sell, but, wait, you remind yourself you are in for the long haul.
So what did I do? Well I removed the widget, duh, allowing myself to forget the worry and move on. There is a bigger picture here than me staring at some red and green numbers instead of doing my work. Market timing, psychology/worry, and short term investing can kill not only the average investor but even those who actively manage their investments, portfolio, or fund. To avoid such murder of the mind, don’t track your portfolio on a daily basis. Weekly could be pushing it too. Your long term goals should include holding some company for many many years - 5-10 should be a low number. Knowing the stock price on a daily or weekly basis can either make you big headed or conclude you are stupid for choosing such trash.
If it is trash, the price is not going to decide this for you anyway. The numbers and news will.
How do you feel about this? Chime in time.