Author Topic: How do you control emotion when your stock goes down  (Read 4278 times)

fuluvu

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Re: How do you control emotion when your stock goes down
« Reply #20 on: August 29, 2018, 10:58:41 AM »
Proper position sizing and portfolio construction can really help. Never take more risk that you can afford, either financially or psychologically. Unfortunately, many people deceive themselves about their true risk tolerance. Know thyself.

I would echo writser that watching the tickers flash green and red as they tick up and down is deleterious on multiple levels. One reason that day trading doesn't work is that this type of behavior grinds people's psyches down over time.

Last but not lease, watching other people get rich is mentally painful. It's best to stay away from the noise on Twitter, CNBC, etc. Stick to your strategy and don't worry about what everyone else is doing.

You have very good points. Watching stock tickers every minutes, hours or everyday is detrimental to one's health, physical or financial. There is average the same up and down days every year. Because of human psychology, people's unhappiness from losing money is double the happiness from making the same amount of money. Similarly, people's unhappiness from his portfolio down days is about double the happiness from his portfolio up days. Thus, on average, you are unhappy everyday if you watch stock tickers or your portfolio everyday.

Check your portfolio or stock price weekly or monthly might be a good idea. It not only makes your much happier, but also saves your a lot of emotional energy so that you can focus on fundamental research or other creative activities.
« Last Edit: August 30, 2018, 09:02:53 AM by fuluvu »


fuluvu

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Re: How do you control emotion when your stock goes down
« Reply #21 on: August 29, 2018, 11:04:11 AM »
I don't think you can "control" your emotions--you can only take note of them. I've learned to think of myself as having two internal advisors, one is Emotion the other is Reason. Emotion is loud and insistent and you feel what it wants in your body. You never need to stop and ask yourself "what does Emotion want me to do?". Reason can be much quieter and tends to get drowned out by Emotion. I like to stop and say to myself "Ok. I know what Emotion wants, now what about Reason?" In the case of a losing position, Emotion may say "HOLD" and Reason may say "SELL". From there it comes down to choosing which path to follow knowing that if I choose Reason, Emotion will scream at me not to do it! I guess this is where temperment comes in. Can you follow Reason while Emotion is screaming at you not to? It's especially hard because Emotion has access to your body and gut in a way that Reason does not.

Very good insights regarding Emotion and Reason.

LC

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Re: How do you control emotion when your stock goes down
« Reply #22 on: August 30, 2018, 07:39:05 AM »
I'll echo what people have already said - writing.

Writing works because it crystallizes your thinking. Inside your head you can feel any which way about something. Writing it down and reading it will show whether what's going on in your head makes sense or not.

Try to be smart on both sides when looking at Mr. Market: if it goes down and you want to buy more, it could go down further (so buy just a bit more). If it goes up and you want to sell, it could go up even more (so sell just a bit).
"Lethargy bordering on sloth remains the cornerstone of our investment style."
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brk.b | cash

bargainman

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Re: How do you control emotion when your stock goes down
« Reply #23 on: September 02, 2018, 02:28:01 PM »
The main emotion that you are attempting to control is fear possibly anxiety. As such I would encourage you to study the amygdala prefrontal cortex. Here is a quick article with suggestions to get you started

https://qz.com/450517/us-navy-seals-conquer-fear-using-four-simple-steps/

Shooter MacGavin

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Re: How do you control emotion when your stock goes down
« Reply #24 on: October 22, 2018, 09:08:49 AM »
One way I've found to deal with it is to project your returns over an appropriate time period, and then build in mentally or on a spreadsheet an "allowance for equity loss" similar to the way a bank or insurance company does it...so if you're targeting 20-25% returns, maybe 7-8% is a reasonably conservative allowance annually that you can put aside in a reserve....so therefore you're really expecting to earn 13-17% annually.  If you're doing better than that, just assume you'll do a bit worse over time.

It's also fairly easy to test how your portfolio would perform over time given a few large loss scenarios..and then just know that you have enough of a buffer to withstand even a few zeros over time.

I guess this is a complex way of saying bake it into your expectations and know why you'll still be ok.

SharperDingaan

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Re: How do you control emotion when your stock goes down
« Reply #25 on: October 23, 2018, 08:13:12 AM »
We just take a page from the 'stock' versus 'flow' view of human resources. Stock of 'employees' as family assets less liabilities, inversely ranked by 'accessibility'. Flow of 'employees' as investment cashflow less all debt service. 

We have a life outside of investing.
So long as we hold a lot of quality assets and are cash-flow positive - we really don't care if the price falls, as we don't need to sell.
We will also hear from other people, and have a much healthier life/investment balance.

We're not that concerned with timing either, as we're not trying to buy when 'XYZ' is cheapest.
We just need to be able to broadly recognize when 'XYZ' is both cheap and expensive, we're pretty good at it, and act accordingly. There will be sizeable gains along the way, they'll pay off mortgages and business investments, and the family willl permanently live better as a result. Whether an individual investment takes 1 year, or 10, it's out of our control - so why get worked up about it?

Long-term greedy, and not short-term focused.
Obviously if opportunity presents, we will look at it (Euro banks) - but our interest is primarily practice, and the 'teaching' opportunity; occassionally a little fun as well ;) Arguably our real risk is the 'loss of grounding' as the family liabilities shrink to zero. Our cure has been the back-of-a-truck overland trip through the third world, the mix with the people, and see/smell the dying and the sick. Ultimately, social enterprise at work.

SD



« Last Edit: October 23, 2018, 01:49:30 PM by SharperDingaan »

Lance

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Re: How do you control emotion when your stock goes down
« Reply #26 on: October 23, 2018, 07:31:47 PM »
Glenlivet

Thanks
Lance

Cigarbutt

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Re: How do you control emotion when your stock goes down
« Reply #27 on: October 23, 2018, 07:45:25 PM »
Glenlivet
Thanks
Lance
When a stock really goes down,
Do yo double down?
or
Do you make it a double?
Thanks

TwoCitiesCapital

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Re: How do you control emotion when your stock goes down
« Reply #28 on: October 23, 2018, 09:53:41 PM »
Glenlivet
Thanks
Lance
When a stock really goes down,
Do yo double down?
or
Do you make it a double?
Thanks

The two don't have to be mutually exclusive :)

Viking

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Re: How do you control emotion when your stock goes down
« Reply #29 on: October 23, 2018, 11:13:25 PM »
I go over ‘the story (why i bought the stock in the first place). Is my logic correct? If the story is the same (or better) then i hold.

When we get the big downdrafts like the past couple of weeks, watching tv can be dangerous. The announcers are stressed and their tone and questioning feeds insecurity. Many of the ‘professionals’ they talk to have little idea what they are talking about. Fear is in the air and it is important to keep as rational as possible.