Do I feel battered on reds?

Hey all!

A quick update on my portfolio and a personal write-up. As you all know I have opened positions on my first batch of investment only last month, and there has been some rough tides already as seen below.

  stocksummary160814

The portfolio’s value was the worst two weeks ago, where its unrealised loss amounted to near -2% and on top of that, I have another batch of orders worth $2,000 to be executed this month on the same stocks as I explained in my First portfolio update under Investment Planning. Should I halt the orders for this month and wait or should I just go for it?
I would like to share my thoughts towards how to think like a profitable long-term investor in this unrealised loss scenario. If you are a new investor for long-term, I sincerely hope you would benefit from this post before you experience this first hand.

First and simplest, try focusing on your long-term goal towards investment and ignore the market noise. This looks simple when you are not holding a position but once you are vested, emotions totally take over most of the inexperienced. Also again, as you might have heard hundred of times, you should only
invest money that you do not need for at least the next 5-10 years. It is best if you aim to invest for retirement. This eliminates the emotional stress of trying to liquidate your positions as soon as possible, which will most likely force you to make the wrong move. And this is indeed an extremely vital tip to any type of investors, even traders.
However, note that not all news you read and hear are noises. Only facts should be trusted- take recent Malaysia Airlines incidents for example, these crashes are facts and they will directly impact Malaysia’s economic. Opinions on the other hand, such as analysis of professionals in the field, are just an assessment from facts hence they are just ideologies and theories. Theories could change anytime with new facts and research, while fact is a definite record of history.

Second option is to try recall the reasons why you bought these positions; Has anything changed since you bought the stocks; Is the change big enough to change your stand?
Knowing the reasons of your purchase is extremely important. It should only come after deep research, analysis and a backup plan which I will explain in future write ups. If you buy a rumor, be prepared to donate your investment to the next pump and dump scam. It just shows that you did not educate yourself well enough in basics of investment.
Once you know your reasons to invest, either due to a rising trustworthy management team or a monopoly of essential daily service/product, you need to ask yourself and do further research if there is any changes that conflicted with your reasons to invest in that particular stock.
If your reason stays valid and stock prices are dropping, you know what to do- stock them up like how you stock those “50% off toilet rolls” during a GSS! In a bit, people will eventually come to realise that this worthy stock is undervalued and they will come out with the same reasons to invest in this firm as you did, hence pushing the stock prices back up.

Thirdly if all fails, think like Warren Buffett with these eight points and have fun riding the wave, up and down. 🙂

warrenbuffettquote

Concluding, I hope this post will remind everyone including me to focus on our own long-term goals and ignore the noises. You will then realise that you are a step closer to Financial Independence when you wake up every morning, empowered with yesterday’s experience and knowledge.

Regards,
The Independent Abecedarian

It’s either you dream big, or nothing!

2 thoughts on “Do I feel battered on reds?

  1. Hi TIA

    Love the quote from Buffet.

    You are absolutely right. If the reasons that you buy from the start still remain valid when the value goes down you should be happy instead that you can add more to this now at a cheaper price.

    Having said that, keep reviewing the reasons to ensure its not self propechacy and it is rightfully valid that you dont overpay.

    1. Hey B,

      Thank you for your comment on this post. I always believe in the 80-20 rule for trading success- 80% psychology and money management, 20% strategy. With proper capital management and trading plan when entering a trade, emotions are the only thing you have to worry about when holding a position, not anything else.
      And true, reasons might change over time but what I am afraid is that the higher the frequency of reflection on your purchase reasonings, the higher chance of revising the reasons into something invalid. This galore of changes in reasons will have a snowball effect towards the very end.

      Regards,
      The Independent Abecedarian

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