Monday, 30 March 2020
How to know if you are overreaching?
To the "lucky" few, self-awareness comes easy.
Like my ex-colleague many years ago who lost $5K "investing" in stocks, and just like that, he forever swore off investing in the financial markets!
To him, the pain of losing money is more than the fear of missing out....
Unfortunately, to the majority of us, especially when we have started our "investing" journeys in a bull market, this self-awarenes may take a bit longer...
However, with the recent extreme volatility within a short space of a few weeks, we all had our "tyre meets the road" moment.
Let's use the jogging analogy.
If we are jogging at a comfortable pace, we can have conversations with our jogging partners without losing our breath... Some of us can even even joke around and have a few laughs along the way!
But if you are struggling, and your mind can't think straight except catching your next breath, you may want to slow down your pace a bit. You are pushing yourself too hard...
And if you prefer to jog as a group and not alone, you may want to find new jogging "kakis" that are more on the "same level" as you? Why do this to yourself? Trying to fit in when you are not ready?
For those who drive, ever wonder why do we need the tachometer?
I mean got speedometer to tell how fast we are moving.
Then got odometer to tell how far we have travelled.
Come to think of it... What's the tachometer for???
If we rev our engines until we get to the redline zone for an extended period, you'll know.
Chatty person suddenly becomes quiet...
Quiet person now super talkative...
You take out your anxieties and frustrations on people that matter (spouse, children, parents)
Its affecting your day job at the worst possible time ...
Messing up your sleep...
Tired rest; hungry eat.
Listen to your body.
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11 years between last GFC Big Bear and beginning of this COVID-19 Bear is a large window that allows so many new retail investors to come on board to join FIRE movement and "passive" income.
ReplyDeleteCW,
DeleteThe survivors of this current bear market would have completed their first bull/bear cycle.
They can take over from us in the next bull cycle if they decide to start blogging themselves ;)
It would be good to have more bloggers sharing their own experiences and actual track record, not about who said this or that.... Or this is what I've read/researched/backtested ;)
We need more bloggers like you - real people, real positions, real stories!
You stay healthy and have long life like Mahatir OK?
Same like learning any new "course".
ReplyDeleteEach class has its own batch of new students.
Some students enjoy the lessons and learn and make mistakes then are ready for the real world.
Other students drop out, cannot handle the stress, don't wanna continue this path.
Some students don't learn so well, but still don't drop out, next cycle still kena whack.
Worse, some students don't learn so well, but think they learnt it all already... ok if they themselves kena whack but end up teaching other people wrong things.
ERSG,
DeleteThat's an excellent summary!
I couldn't have said it better myself ;)
It applies to work situation too.
Last month, we had a new sales staff on the selling floor.
As usual, we began taking bets how long he will survive (I know its bad, but its a "tradition" thing).
I'm the one who is the most pessimistic. I said I'll be surprised he will stay for more than 6 months; he got kicked out in less than 2 months.
Not everyone can do sales one.
Heh everyone has their own specialization.
DeleteMust be true to oneself.
Some people cannot do sales.
Not everyone is suitable to run their own business.
Some people are investors, some are savers.
Some earn more, some spend less.
Some ppl trade, others long term investors.
Some people can short well, some people can do long positions.
Cannot be one person know everything, down market short perfectly, up market long perfectly, and know when to trade the dips.
Most important is to know oneself and own skillset and tolerance. Better to do one thing well, than to screw up trying to do many things not suitable for oneself.
ERSG,
DeleteAs a penguin, it took me years of multiple job-hopping until I found my ex-company where I can finally "fly" underwater.
My financial journey took a different turn when I discovered futures and the bigger arena of forex ;)
I'm more macro top-down. I've given up trying to pretend I can do bottom-up analysis on individual companies in sectors and industries I've no clue on...
Hi SMOL,
ReplyDeleteQ:How to know if you are overreaching?
A: When you have to tip toe.
Yaruzi,
DeleteLOL!
Can joke in this environment meant you are doing more than OK ;)
You definitely not overreaching!
You the man!
For the newer investors who intend to have a longer journey, it’s perfect time to be if you experience crisis now. Better to suffer early and learn later which will strengthen you.
ReplyDeleteBut if this crisis you cannot even tahan, then better be crippled losing one leg or one hand or even one eye first than to later in the journey just collapse.
If our so called warchest is not too much, n u dun have a stable Govt job, it’s better not to “geh kiang” and keep using WB “be greedy when other is fearful”.
To be honest for even retail investor, if our warchest is not more than $200k excess cash, it’s not a lot, and very quickly it can be gone, if further crisis come. unless u have a warchest or 500k and above n backup plan in jobs etc, then maybe u r in a good position.
It’s better to employ strategy that can protect you from downside and upside.
Very simple. Eg when sti drop to 2.5k n below, let’s say i buy in. At the same time, if u have stock that previously have double bagger, u can sell a part of it to cash out during this rally. or other stocks or gold or silver or any other thing.
Then if stock drop, u have excess even cash to buy cheap. If stock rise, u already bought the cheap shares earlier. Both ways, u are protected!
Something like that..... but this means that in the past few years, u must already anticipate downside and have some investment which have upside when market is good.
If u only listen to all the guru, and all invested in shares only with single direction, then sorry....
Rolf,
DeleteIn a way, I'm "lucky" I started my journey in early 1999 and 1 year later experienced the Nasdaq 2000 crash.
It was painful but the damage was a lot lesser than if I had started my journey in 2010 and had 10 years of bull market beguiling me that I'm super smart!
All I had to do was just buy the freaking dip!!! Easy!!!
Without a bear market, there would not be any incentive for me to explore other asset classes.
I would not have learned how to fly with BOTH wings.
Nor would I employ money and risk management tools to protect what I've earned.
And more importantly, the man-in-the-mirror reflections to discover and learn about myself.
The MIND part of the 3 Ms (Method, Money, Mind) to me is the core.
Without knowing who I am, how can I pick and choose the right poison and hedging tools that will fit my feet?
In a bull market, its OK to wear other people's shoes.
But as some have discovered, in a bear market, badly fitting shoes can cause one to trip up quite badly...
I even read a blogger write something like this which show the naive ness in the blogosphere.
ReplyDeleteHe/she wrote.
if u buy a stock at $1 x 10 lot and dividend of 5% ($500 pa). The blogger than said:
and if stock drop 30% during this crisis to $0.70, your 5% dividend will become 7% yield now and hence the blogger encourages people to keep on buying.
I ALMOST FAINT WHEN I READ THE ANALOGY.
Rolf,
DeleteSometimes its sad (if not hilarious) when "bei kambing" tries to do the "if you believe me, follow me" rhetoric...
That's why I poked about:
I don't want percentages; I want money
First of all, no one buys a dividend stock to collect "yield". We can't buy anything with percentages...
What we collect is the actual dollars and cents in our hands or bank accounts.
Secondly, the stock market is a discounting mechanism. For the price to drop 30% meant the sellers are anticipating or betting on a reduction in the dividends counting in real money.
And hell hath no fury like a dividend investor scorned when a dividend is suspended!!!
You think why some REITs are down 70%?
That’s why I almost faint. And the funny thing in that blog is u cannot comment! So the blogger just refuse to know the truth! and continue to self deceive
DeleteYes indeed it’s about absolute value. Hence who cares about your percentage when ur warchest is just 5k. Let’ say 50% increase after 1.5-2 yrs, only 2.5k. Even 50k warchest only a mere 25k over a period of 2 yrs.
ReplyDeleteWith the time and effort, many people can easily earn that extra 25k if you have career or business capability.
Of course if your watchest is 500k, then it’s a different story. 50% is 250k!
Rolf,
DeleteThat's is why when we have a 5% yield on a $2 million portfolio, we don't use percentages.
We say we have $100,000 dollars passive income per year ;)
Now that's how you impress the panties off babes!
LOL!