I used to play a little head game with myself when it came to the money I was investing. I knew that investing in the stock market involved risk, I knew there was a pretty good chance that at any given point in time I could either make major headway or lose it all, and I didn’t want to deal with the emotional side of losing money. To help deal with the market ups and downs, I told myself that the money was already spent. Once the money went into my investment account, it no longer existed as real money in my mind. It was like paying to play a video game. I told myself that since I didn’t need the money for day to day life, that was okay.
We’ll ignore for the sake of this post the fact that I really wasn’t very good at saving money at the time, and that this was pre-crash 2008.
This method served me reasonably well my first go around. I didn’t jump for the sell button every time one of my stocks dropped a little, and I came out at the end of it with more money than I started with. A couple of my stocks decreased a little during those years, but it was nothing compared to what I lost in fees (think I’m bitter much?)
I actually misplaced my log in information for about 6 months right around the crash, so I partially credit that for saving me from having a series of massive panic attacks as well.
I’m not going to be able to play the same head game with myself this time around. I’m not playing anymore, because this isn’t a game. I need my money to work for me, and eventually look after me in the long run. If I’m planning on holding a significant portion of money in investments, which I hope to, it needs to be taken seriously. I need to learn the lessons that result from feeling the pain of a loss. For that matter, I need to learn how to intelligently cut my losses rather than holding on for dear life hoping they’ll come back up one day. I also need to learn how to do it without getting twitchy on the sell button.
Readers, how do you deal with investment ups and downs? Do you find that being better researched helps ease your mind, or are you still reactive watching the numbers?
Recommended Reading: Building Fourplex Apartments/Condos in Canada