What I learned when I let go of a bad investment

When the value of my investment went below the minimum amount I had set for myself, I was unable to let go. I watched for almost a week as the value plummeted until I had lost almost $50. It may not seem like a lot of money to a lot of people, but for a student who is starting out in this world, I felt the loss. I wasted a lot of time begging the screen to show me an upward trend instead of taking action.

I have always prided myself in being aloof. Almost detached and unaffected by a lot of things that bother a lot of my peers. Yet, I attached a lot of value to an abstract asset. One that I had not held for a very long time.

A contradictory, disruptive, thought I keep having is that I have to get used to losing money in order to make it in the end. That I should have waited the momentary blip out. That I should have tolerated the discomfort of seeing my balance going down. How can I train myself to be a ruthless, within reason, risk-taker?

The “test your risk tolerance” quizzes show me that I am more conservative than I am risky. There is a reason that I do not read horoscopes. They shape me even if the rational side of me knows they are worded to apply to anyone. No offence to the believers. I regret taking those tests.

As an autodidact of stoicism, I have been trying to accept the things that I cannot control in order to achieve the greatest possible control over my emotions and thoughts in order to  survive this world. I had no idea a test of my impulses would come too soon.

 

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The art of thinking clearly

Reading The Art of Thinking Clearly: Better Thinking, Better Decisions was eye-opening for me in a lot of ways. I realised that it is absurd to try to rid myself of all kinds of emotions and impulses when making decisions. It is impossible to do that therefore chasing this obsession is futile. Emotion will always be the dominant part of my character. The best I can do is study stoicism.

I felt reprimanded after reading the first chapter. When I started investing, I had high hopes that my success rate would be quick and easy. That I was smart enough to succeed in this world. My arrogance has been knocked down a few notches after being reminded that I have “overestimated the probability of my success”. It was hard to read about the “cemetery”.  A place where failed investors who are just as hard-working and as ambitious as I am may end up regardless of how dedicated they may be.

The book is not as cynical as the previous paragraph makes it seem. It serves as a reminder to appreciate the successes that I have and to always remember that I have come far compared to how I was in the past. He calls to my attention the fact that the more successful people get, the more dissatisfied they are with what they have. As we succeed in life, we tend to compare ourselves to people who may be light years ahead of us and forget far we have come to achieve all that we have.

Additionally, I learned a lot about the human flaws and how we can live with them by just being aware that they exist. I have to have awareness that I am biased and fallible. I have to accept the fact that I am shaped by a lot of things out of my control, evolution, the way I grew up etc. It prompted me to borrow Daniel Kahneman, Paul Slovik and Amos Tvesrky’s Judgment under Uncertainty: Heuristics and Biases from the university library because it sparked a new interest on human behaviour.

What I loved about this book is that the author did not claim to have come to some conclusion on how we can better ourselves. I did not want to spoil this book so I barely scratched the  surface. There is more to learn. It is perfect for people who are obsessed with cognitive science too. Like I told my friends, this is not a self-help book!

 

A momentary panic

I was alarmed to see that the value of my investment had plummeted more than 3%. I was not ready for the feeling of distress and the immense temptation I had to sell my asset.

This impulse is intense. It is a constant nudge. An itch I am finding hard to ignore. However, since I am trying to be less rash when it comes to making decisions, I will wait until the value of my asset reaches the lower limit I have set for myself (I learned from my online class that this helps letting go of stock easier). I fear falling into the trap of attaching too much value to my stock to the point where I am unable to let it go.

I am aware that I may be responding to sporadic noise and not information that is impactful. However, because I have one asset, I am keeping a close eye on the security. Watching the daily fluctuations is a highly stressful situation. Despite this, I have no choise but to endure this until my portfolio is more diversified.

Another impulse I am experiencing is the urge to buy another stock to attempt to tip the scale into a more balance position. Where this illogical thought is coming from, I do not understand. As a way to deal with my impulses, like I said before, I have ordered a stock, which I have to cancel in a few hours.

As a way to learn more about impulses and control, I have decided to learn about making decisions under uncertainty. I have already borrowed Daniel Kahneman, Paul Slovik and Amos Tvesrky’s Judgment under Uncertainty: Heuristics and Biases from the university library. Hopefully knowing more about my flaws will help me be more reasonable in making decisions.