Controlling emotions

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sox2013
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Controlling emotions

Post by sox2013 » Mon Jun 03, 2013 2:27 pm

I've been thinking about this topic for awhile and wanted to get the forum's opinion.

I'm currently 35 years old and have always maintained an AA of around 70% stocks/30% bonds. I've invested for the past 15 years and are very comfortable with investing, markets, AA, risk, etc. My net worth has increased pretty significantly over the past five or six years (mainly due to a very high savings rate and recent home sale) from $350K to over $1M.

My question is related to controlling your emotions related to the volatility of being invested, specifically as your portfolio starts to grow. A few years back, I wouldn't think twice about the daily or weekly swings in the markets. Even if I looked at my portfolio daily, the maximum "loss" on any given day was $1-2k (except of course during the worst days of 08/09).

However, fast forward to today and a bad day or week in the markets could mean losses of $20-$30K (if not more). Percentage wise the losses are the same and my AA hasn't changed, but the "losses" seem to rattle me a lot more because of the actual dollar size.

Just wondering if anyone else has experienced this and how they dealt with the emotions (ie. reduce stock exposure as the portfolio increased in size, stop looking at balances, etc.)?

Thanks

Investing is boring
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Re: Controlling emotions

Post by Investing is boring » Mon Jun 03, 2013 4:30 pm

I have a natural tendency to enjoy downturns in the market. I like buying on sale... Although 2008 wasn't fun... Its when the market is on a bull run that I get skidish. I am strange, I know. That said, I focus on my portfolio cash flow to calm myself. I do a rough weighted average yield (dividend and interest), and break that back down into a monthly income. In your case:

($350k * 2.5%) / 12 = $729 per month
($1m * 2.5%) / 12 = $2,080 per month

As my portfolio grows, so does my cash flow. In a crash, typically dividends and interest do not fall nearly as much as the NAV - so it may calm you.

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cheepsk8
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Re: Controlling emotions

Post by cheepsk8 » Mon Jun 03, 2013 5:47 pm

First of all, congratulations on your portfolio. You've worked and saved and earned every cent and I can understand the fear of losing everything you've worked so hard to achieve. I'm not as lucky as you and just started becoming a "boglehead" so my portfolio is considerably less than yours; therefore my advice comes with the caveat that it is easier said than done. But to you I say, "Tune out the noise and stay the course."
If you are in your 30s, which I am as well, we should be hoping for lots of bear markets, so we can buy stocks "on sale." You are 35 and if you're not going to be retiring anytime soon then who cares what the market does in 1 day or a week or 1 month or even 1 year. You're not going to be needing that money anytime soon anyways.
That being said your risk tolerance might not be as high as you think. I look at risk/reward as 2 sides of the same coin. You cannot have the rewards of higher equity returns without taking a risk of possibly losing half of your portfolio (or more). It's easy to say I like risky investments when you get higher returns but a lot harder when those same risky investments start losing money. It seems to me your risk tolerance is a lot less since your portfolio has grown.
So either 1) tune out the noise, enjoy your life and stay the course even if there is a repeat of 90s dot.com bubble crash or 08 crash caused by subprime mortgages. Or 2) if you have to check on your portfolio daily or weekly or monthly I would adjust your AA to something you're more comfortable with so you don't lose sleep over it.

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bogleblitz
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Re: Controlling emotions

Post by bogleblitz » Mon Jun 03, 2013 5:53 pm

instead of tuning out the noise. embrace it. Since you watching your portfolio everyday, it would be very hard to stop watching.

So keep watching, and eventually, the excitement and fear fades away. Slowly the 3k loses or gains don't matter after awhile.

Also time to pick a better hobby instead of watching stocks all day.

scone
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Re: Controlling emotions

Post by scone » Mon Jun 03, 2013 5:58 pm

I think if you try to suppress your emotions, you'll end up with a heart attack. That said, I am "de-risking" my portfolio as I go along, since we are not too far from retirement. I learned this month that I will have to reduce my bond duration if I want less thrashing. This month felt like getting in the way of a stampede of wildebeests. I wish the Mr. Market's "tuition" were not so painful, but that's just the way it is. :beer
"My bond allocation is the amount of money that I cannot afford to lose." -- Taylor Larimore

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Kenkat
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Re: Controlling emotions

Post by Kenkat » Mon Jun 03, 2013 6:11 pm

Bigger down days in terms of total dollars also mean bigger up days as well. I'd take a look at the bigger picture because the big ups and downs mostly offset. I'd also take a look at how much your portfolio increased in a given good year such as 2012 or 2013. The occasional big down day is all part of the bigger picture of the overall trend of the market which is hopefully up for the long term. Keeping that in perspective is always helpful for me.

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Re: Controlling emotions

Post by Fallible » Mon Jun 03, 2013 6:15 pm

sox2013 wrote:...
My question is related to controlling your emotions related to the volatility of being invested, specifically as your portfolio starts to grow. A few years back, I wouldn't think twice about the daily or weekly swings in the markets. Even if I looked at my portfolio daily, the maximum "loss" on any given day was $1-2k (except of course during the worst days of 08/09).

However, fast forward to today and a bad day or week in the markets could mean losses of $20-$30K (if not more). Percentage wise the losses are the same and my AA hasn't changed, but the "losses" seem to rattle me a lot more because of the actual dollar size.

Just wondering if anyone else has experienced this and how they dealt with the emotions (ie. reduce stock exposure as the portfolio increased in size, stop looking at balances, etc.)?

Thanks
The feelings you describe as your portfolio grows reflect your tolerance for risk and the possibility that you will want to reassess your asset allocation based on that tolerance. There are many resources for this and here are just two I've found especially helpful:

__the wiki: http://www.bogleheads.org/wiki/Risk_and ... _take_risk

__Jason Zweig's book, Your Money and Your Brain.
John Bogle on his often bumpy road to low-cost indexing: "When a door closes, if you look long enough and hard enough, if you're strong enough, you'll find a window that opens."

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entyrii
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Re: Controlling emotions

Post by entyrii » Mon Jun 03, 2013 6:17 pm

I agree with the others that you should certainly stay the course and not make any emotional decisions. However, it sounds to me like your comfort with risk as decreased somewhat. As your current balance has grown, has your need to take risk stayed the same or decreased? I certainly don't know what your investment/savings/retirement goals are, but your net worth has swelled tremendously since you started working 15 years ago. Do you still have the same need to take risk in the first place?

If your need and willingness/comfort to take risk has decreased, perhaps it would be prudent to consider a somewhat more conservative AA going forward. If the market loses 50% tomorrow, your account balance would be down to about $650k. Would you honestly stay the course in that event? Would you start to sweat a bit and consider a change to your AA if that happened? If you can envision yourself having these thoughts in that worst-case scenario, then that might be a sign it's time to rethink your risk profile and ultimately your AA.

Just my 2 cents. This is certainly something you have to ponder and decide for yourself.
"The more they overthink the plumbing, the easier it is to stop up the drain." | -Montgomery Scott

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Re: Controlling emotions

Post by RenoJay » Mon Jun 03, 2013 6:22 pm

I hear you. I tend to stick pretty close to my asset allocation overall, but I definitely have emotions along the way and I tend to "peak" far too frequently at what I have. Like an earlier responder to the initial thread, I usually get more comfortable/relaxed after a big downturn (because I view stocks as cheap) and I tend to get more nervous during a fast bull run like what we've had recently. The way I handle it is to rebalance frequently on the way up (I've sold stocks probably 10 times this calendar year) but slowly on the way down (I'll buy stocks once or twice if my AA gets pretty far out of whack.) I realize this means I probably leave some money on the table, but at 4.5 years into a bull market, when the average folks are finally getting excited about stocks, I feel fine to get a little more conservative. Also, i find the act of selling a little bit (even if it makes virtually no statistical difference in my likely outcome) helps me get over the emotions that scream "get out of the market." By handling these emotions, I'm able to stay in overall and enjoy most of the upswings.

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Re: Controlling emotions

Post by livesoft » Mon Jun 03, 2013 6:43 pm

sox2013 wrote:However, fast forward to today and a bad day or week in the markets could mean losses of $20-$30K (if not more). Percentage wise the losses are the same and my AA hasn't changed, but the "losses" seem to rattle me a lot more because of the actual dollar size.
A couple of things:

1. Look at your portfolio a lot more often ... at least every day.
2. Spend some money at least equal to a one day movement of your portfolio every now and then.

These two things will really help you realize that "It's only money."
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frugaltype
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Re: Controlling emotions

Post by frugaltype » Mon Jun 03, 2013 6:50 pm

Once I had a certain amount of money, I moved more into safe stuff. It's a tradeoff, probably smaller gains for sleeping at night.

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Re: Controlling emotions

Post by bengal22 » Mon Jun 03, 2013 6:55 pm

I try to put things in perspective when the market has bad days. For instance, last week when both my bonds and stocks dropped I just rationalized away the drop by saying that I was merely back to where I was in April. Even in 2008, I could still look at my net worth as having just retreated back to a certain date. Plus I have the faith that there will always be a steady straight line upwards despite the jagged peaks and valleys.
"Earn All You Can; Give All You Can; Save All You Can." .... John Wesley

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Toons
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Re: Controlling emotions

Post by Toons » Mon Jun 03, 2013 7:08 pm

"Just wondering if anyone else has experienced this and how they dealt with the emotions (ie. reduce stock exposure as the portfolio increased in size, stop looking at balances, etc.)?"

I guess having lived through so many bear markets with significant declines in the value of my portfolio,speaking for myself ,I have become desensitized to the volatility.I understand that volatility is an INHERENT factor when investing in the stock market.Over 3 decades I have found the shares that I have purchased in declining markets are the ones that power the portfolio to new highs as the market once again regains lost ground and moves on to new highs.
I guess my advice to you ,given your young age is to just keep investing,the market will have wild swings,and try to retrain your brain to realize that declining markets are an OPPORTUNITY for you to pick up more shares for your money and should be welcomed as a long term investor.
If the market went up in a straight line,becoming wealthy would be easy for everyone.But such is not the case.Those who can withstand the volatility ,hang tough and continue investing,sticking fast to their asset allocation,will be rewarded. :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

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pjstack
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Re: Controlling emotions

Post by pjstack » Mon Jun 03, 2013 7:57 pm

Those "losses" of yours; they aren't losses unless/until you sell. There are those who disagree with that statement, but I don't understand why.

Same with the gains, I suppose.
pjstack

Dopey
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Re: Controlling emotions

Post by Dopey » Mon Jun 03, 2013 8:02 pm

bogleblitz wrote:instead of tuning out the noise. embrace it. Since you watching your portfolio everyday, it would be very hard to stop watching.

So keep watching, and eventually, the excitement and fear fades away. Slowly the 3k loses or gains don't matter after awhile.

Also time to pick a better hobby instead of watching stocks all day.
This. I don't take the time or energy to check my balances every day anymore. I do it once or twice a month. If, in the rare occurrence, that it's lower than the last time I updated my spreadsheet, I simply don't update it. :D

learning_head
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Re: Controlling emotions

Post by learning_head » Mon Jun 03, 2013 8:27 pm

Another technique: have 2 values in your mind - your "probable" portfolio value and your "current" portfolio value. "Probable" one is a lower value - think of some values where your investments are not likely to fall down to. E.g. pick [ current value - 30% ], or base it on PE10 * 15, or anything else that makes you think of it as "I am likely to have at least this much". Then train yourself to think of only "probable" value as what you have, not "current" one that jumps around every day. After that, only use "current" value for rebalancing and "probable" value as your wealth. Then you can decide when to up or down your "probable" value to make this mental trick work for you...
Last edited by learning_head on Mon Jun 03, 2013 8:28 pm, edited 1 time in total.

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BolderBoy
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Re: Controlling emotions

Post by BolderBoy » Mon Jun 03, 2013 8:28 pm

sox2013 wrote:Just wondering if anyone else has experienced this and how they dealt with the emotions (ie. reduce stock exposure as the portfolio increased in size, stop looking at balances, etc.)?
Ummmm, isn't this an indication that your AA isn't quite suited to you anymore?

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Re: Controlling emotions

Post by RenoJay » Mon Jun 03, 2013 8:59 pm

BolderBoy wrote:
sox2013 wrote:Just wondering if anyone else has experienced this and how they dealt with the emotions (ie. reduce stock exposure as the portfolio increased in size, stop looking at balances, etc.)?
Ummmm, isn't this an indication that your AA isn't quite suited to you anymore?
I think that's the obvious, but not necessarily correct, conclusion. The reason is that emotions are irrational. When my emotions scream that the market is going to plummet, my desire is to move 100% to cash. When my emotions scream that the market is going to rise, my desire is to move 100% to stocks. When my rational brain joins the convo, I tend to stick to my asset allocation (whatever it is) because that's what logic dictates. Obviously, my emotions are frequently incorrect, and figuring out a way to let my rational side get into the conversation is more important than what my AA says. (Although admittedly, having the AA written down and looking at it IS a good way to get my rational side to join the conversation.)

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fatlittlepig
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Re: Controlling emotions

Post by fatlittlepig » Mon Jun 03, 2013 9:06 pm

I personally like it when the market is low then the money I am investing is buying more shares.

If you are rattled by this at age 35 you have to realie that 20-30k drop in your portfolio is nothing.
sox2013 wrote:I've been thinking about this topic for awhile and wanted to get the forum's opinion.

I'm currently 35 years old and have always maintained an AA of around 70% stocks/30% bonds. I've invested for the past 15 years and are very comfortable with investing, markets, AA, risk, etc. My net worth has increased pretty significantly over the past five or six years (mainly due to a very high savings rate and recent home sale) from $350K to over $1M.

My question is related to controlling your emotions related to the volatility of being invested, specifically as your portfolio starts to grow. A few years back, I wouldn't think twice about the daily or weekly swings in the markets. Even if I looked at my portfolio daily, the maximum "loss" on any given day was $1-2k (except of course during the worst days of 08/09).

However, fast forward to today and a bad day or week in the markets could mean losses of $20-$30K (if not more). Percentage wise the losses are the same and my AA hasn't changed, but the "losses" seem to rattle me a lot more because of the actual dollar size.

Just wondering if anyone else has experienced this and how they dealt with the emotions (ie. reduce stock exposure as the portfolio increased in size, stop looking at balances, etc.)?

Thanks
fatlittlepig

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InvestorNewb
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Re: Controlling emotions

Post by InvestorNewb » Mon Jun 03, 2013 9:19 pm

The trick to controlling your emotions is to a) peek at your accounts only a few times a year (maybe quarterly) and b) if necessary, block access to sites like Google/Yahoo Finance, but also your brokerage account.

I'm actually thinking about getting a web site blocker for Firefox, so that I can employ this strategy myself. Even Bogle himself says "Invest, and don’t peek".
My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)

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Re: Controlling emotions

Post by James2 » Mon Jun 03, 2013 9:35 pm

I'm in pretty much the same position. When the portfolio gets larger and the potential variation (dollar value) gets larger it can be a bit of an emotional roller coaster, especially in the current market. I'm trying to stop looking at balances every day, but its not easy to break the habit. My goal is to drop back to monthly and then quarterly "checkups"...

The idea that perhaps the AA should be re-evaluated is also sound, I've been slowly changing mine to smooth out the ride :-)
It was the emotional roller coaster that indicated my AA was off from where I am in life.

James

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Re: Controlling emotions

Post by icedtea » Mon Jun 03, 2013 9:46 pm

learning_head wrote:Another technique: have 2 values in your mind - your "probable" portfolio value and your "current" portfolio value. "Probable" one is a lower value - think of some values where your investments are not likely to fall down to. E.g. pick [ current value - 30% ], or base it on PE10 * 15, or anything else that makes you think of it as "I am likely to have at least this much". Then train yourself to think of only "probable" value as what you have, not "current" one that jumps around every day. After that, only use "current" value for rebalancing and "probable" value as your wealth. Then you can decide when to up or down your "probable" value to make this mental trick work for you...
Just wanted to say I like this approach. I'll try to adopt it myself. Seems like a more feasible way to get perspective than trying to avoid checking one's accounts. I only hold 3 index funds and any time I check out the NY Times web site the S&P is staring me in the face. But if you can get comfortable with a (current value - 30%) baseline, it seems like it would help prepare you for the big dips, so you can see them as buying opportunities.

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sox2013
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Re: Controlling emotions

Post by sox2013 » Tue Jun 04, 2013 8:05 am

Thanks everyone, some good advice

I think what makes it worse is that I actually like following the markets. And not from a "get rich quick" or trading perspective, but rather from a purely intellectual standpoint. Also, I'm part of a finance organization at a MegaCorp, so I have to be somewhat tuned into the markets (not only equity, but bond and currency markets as well) as part of my job.

So from that standpoint, I'll realistically never go weeks and weeks without seeing what's happnening the markets. And there's the problem, on those especially bad days / weeks, there's always the temptation to see what the portfolio is doing.

I do think my AA is about right for my risk tolerance, it's just somehow getting over the absolute dollar swings within the portfolio as it grows.

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BolderBoy
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Re: Controlling emotions

Post by BolderBoy » Tue Jun 04, 2013 8:33 am

RenoJay wrote:
BolderBoy wrote:
sox2013 wrote:Just wondering if anyone else has experienced this and how they dealt with the emotions (ie. reduce stock exposure as the portfolio increased in size, stop looking at balances, etc.)?
Ummmm, isn't this an indication that your AA isn't quite suited to you anymore?
I think that's the obvious, but not necessarily correct, conclusion. The reason is that emotions are irrational. When my emotions scream that the market is going to plummet, my desire is to move 100% to cash. When my emotions scream that the market is going to rise, my desire is to move 100% to stocks. When my rational brain joins the convo, I tend to stick to my asset allocation (whatever it is) because that's what logic dictates. Obviously, my emotions are frequently incorrect, and figuring out a way to let my rational side get into the conversation is more important than what my AA says. (Although admittedly, having the AA written down and looking at it IS a good way to get my rational side to join the conversation.)
Sounds like you need tranquilizers then, if you can't ignore the financial pornography.

MathWizard
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Re: Controlling emotions

Post by MathWizard » Tue Jun 04, 2013 4:54 pm

Concentrate on your 10 year running averages rather than day to day.

Those are hopefully positive, and that should make your outlook positive.

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Re: Controlling emotions

Post by livesoft » Tue Jun 04, 2013 5:16 pm

I like to buy things on sale, so I am always hoping for a really bad day in the stock market. A big fear of mine is that I will miss one of those days and fail to act because I am stuck flying over the South Pacific or something and the market recovers before I land.
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The Wizard
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Re: Controlling emotions

Post by The Wizard » Tue Jun 04, 2013 5:26 pm

Just think what BILLIONAIRES have to deal with.
Fluctuations of a few million bucks day to day.
So think about that the next time you get antsy...
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LaraZP
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Re: Controlling emotions

Post by LaraZP » Tue Jun 04, 2013 5:36 pm

I have a neat Google spreadsheet in which I calculate the internal return rate of my whole investment since I began.

Based on that I project the date in which I will reach a certain value at the current rate. That future date seldom moves more than a couple of months.

atwood
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Re: Controlling emotions

Post by atwood » Tue Jun 04, 2013 6:17 pm

I know exactly how you feel. When my portfolio was smaller, it was easier to take the ups and downs in stride. But now that there's "real money" on the table, it's harder to stay sanguine about it. And as someone posted above, it's when it reaches new highs that the anxiety is worst; it's as if you're waiting for the other shoe to drop.

Adjusting one's AA only goes so far in relieving these feelings; no investment is truly "safe." My first reaction was to save more and cut spending. But that actually made things worse because then I was worrying over need versus want for almost every purchase. Need is a high standard.

Anyway, I just decided to quit worrying so much. I just went out and bought a nice road bike--entry level but nice--and am enjoying the spring weather.

Stay copastatic!

tpm871
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Re: Controlling emotions

Post by tpm871 » Tue Jun 04, 2013 11:32 pm

Here's what I do:

1. Whenever I look at my total portfolio amount, I record what the DJIA was at the time.
2. I don't look at the total again until the DJIA is higher than the last time I looked.

So essentially, I get positive reenforcement every time I look, since the total is nearly always higher when the DJIA is higher. I avoid negative reenforcement during the down times by not knowing what the total is.

However, I do also regularly look at individual allocations relative to my annual plan to determine when to make adjustments, based on rebalance bands (while at the same time being careful not to look at the overall total). That way I can buy when things drop, without having to dwell on how much I just "lost".

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Re: Controlling emotions

Post by bayview » Wed Jun 05, 2013 1:14 am

sox2013 wrote:Thanks everyone, some good advice

I think what makes it worse is that I actually like following the markets. And not from a "get rich quick" or trading perspective, but rather from a purely intellectual standpoint. Also, I'm part of a finance organization at a MegaCorp, so I have to be somewhat tuned into the markets (not only equity, but bond and currency markets as well) as part of my job.

So from that standpoint, I'll realistically never go weeks and weeks without seeing what's happnening the markets. And there's the problem, on those especially bad days / weeks, there's always the temptation to see what the portfolio is doing.

I do think my AA is about right for my risk tolerance, it's just somehow getting over the absolute dollar swings within the portfolio as it grows.
The trick is to realize that what you're seeing when you "follow the markets" isn't an intellectual analysis of what's going on. Instead, it's the latest hysterical posts by financial writers who are paid to write Exciting Stuff about Recent Changes.

Essentially, you are relying on the content of 7th-grade girls' slam books, with all the (non-)intellectual analysis of the latest financial events.

As to being a part of the finance org at your MegaCorp and needing to be "somewhat tuned into the markets... as part of my job," I think that the perspective that you need to bring is this: you are checking on the noise that is currently going on, so that you can give your fellow workers some intelligent feedback, meaning actual info minus the random marketing and PR blasts. You'll be surprised to find how little real info is out there, compared to the * la la la look at us * stuff that passes as information.

Much of the markets is actually a gi-normous popularity market. IMO it's pretty important to differentiate between the real info and the noise, of which there is a mind-boggling amount.
The continuous execution of a sound strategy gives you the benefit of the strategy. That's what it's all about. --Rick Ferri

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Re: Controlling emotions

Post by letsgobobby » Wed Jun 05, 2013 1:31 am

Rammer wrote:
I don't take the time or energy to check my balances every day anymore. I do it once or twice a month. If, in the rare occurrence, that it's lower than the last time I updated my spreadsheet, I simply don't update it. :D
In all seriousness, I think this is the secret to investing success. :dollar

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Re: Controlling emotions

Post by BHCadet » Wed Jun 05, 2013 1:44 am

When I was younger, it used to bother me a lot when I saw a whole year worth of contributions to our 401k and taxable accounts didn’t increase our net worth at all. Sometime, it even went down.
Now, after witness so many markets up and down cycles, it doesn’t bother me anymore.
Also, I don’t peek at my portfolio every week anymore (It was down from my daily update).
I do check it every other week when I update Quicken with our 401k contributions.

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nedsaid
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Re: Controlling emotions

Post by nedsaid » Wed Jun 05, 2013 7:43 am

Yes, as the portfolio grows the dollar amount of fluctuations gets to be larger and larger. My own portfolio has fluctuated several thousands of dollars a day. In the bear market, my accounts were down by at least a couple years of take home pay.
This can be hard to take.

How do you control your emotions? I don't know that you can, it isn't your emotions as much as the actions you take in response. The best you can do is to own enough bonds to keep your losses in down markets tolerable. Having big losses in my portfolio is emotionally hard.

Part of how I deal with this is to view these events as buying opportunities. I have to remind myself that investors really make their big money in bear markets though it doesn't feel like it at the time.

Having an investment person to talk to during these times can really help. I have a Brokerage account where I utilize a broker that has been in the business for many years. His advice over the years was a big help. He is in business for himself and doesn't have a sales manager breathing down his neck. Part of my retirment is there, the rest is in other accounts that I manage myself.

Though I have a brokerage account, mostly I am a do it yourself investor. I have sought out advice from time to time.
A fool and his money are good for business.

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Re: Controlling emotions

Post by ML 59 » Wed Jun 05, 2013 9:12 am

Reading and studying here at bogleheads.org has had a tremendous calming effect on my investment emotions and subsequent actions.

Several years ago, I discovered this site while searching for help in calming the storm in my head as I struggled - on my own - to make sense of the investment options in my 401(k) and IRA. My crude attempts at market timing were a wash with successes and failures. I knew that somewhere out there was someone (or a group as it turns out) of calm and rational investors that I could learn from. It’s funny how this boglehead – something or other - kept showing up in my Google searches for answers and advice. Finally one day I followed the link and found exactly what I was looking for! :happy

As nedsaid states above, it’s the actions, rather than the emotions that need to be controlled. Armed with that control, I can govern my investing future with much less emotional interference.

Mike

YDNAL
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Joined: Tue Apr 10, 2007 4:04 pm
Location: Biscayne Bay

Re: Controlling emotions

Post by YDNAL » Wed Jun 05, 2013 9:42 am

sox2013 wrote:I'm currently 35 years old...

My question is related to controlling your emotions related to the volatility of being invested, specifically as your portfolio starts to grow. A few years back, I wouldn't think twice about the daily or weekly swings in the markets. Even if I looked at my portfolio daily, the maximum "loss" on any given day was $1-2k (except of course during the worst days of 08/09).

However, fast forward to today and a bad day or week in the markets could mean losses of $20-$30K (if not more). Percentage wise the losses are the same and my AA hasn't changed, but the "losses" seem to rattle me a lot more because of the actual dollar size.

Just wondering if anyone else has experienced this and how they dealt with the emotions (ie. reduce stock exposure as the portfolio increased in size, stop looking at balances, etc.)?
Welcome to old age.... you 35-year old Boglehead! :) Also, welcome to the Forum!

Your post should be bookedmarked and linked every time a young(er) individual doesn't get why anyone uses Fixed income instruments.

My suggestion is to invest according to Ability & Need for risk - but, if $20-$30K Equity movements are affecting/concerning you, then we are dealing with "Willingness" (psychological) to take risk. This may force reduction to Equity risk, assuming your goal(s) are not impacted in a major way.
Landy | Be yourself, everyone else is already taken -- Oscar Wilde

SGM
Posts: 3050
Joined: Wed Mar 23, 2011 4:46 am

Re: Controlling emotions

Post by SGM » Thu Jun 06, 2013 4:17 am

Low market prices are an advantage during the accumulation stage. If you are 30 years from retirement you should hope for lower valuations. I was always interested in accumulating more shares rather than worrying about the total value of those accumulated shares.
Focus on accumulating more shares. When you are saving from your income monthly or weekly, you are forced to dollar cost average.
I preferred to do that when the market was low, but continued to invest regularly regardless of the market.

Now semi retired, I am happy I invested on a regular schedule and "paid myself first."
"Let us endeavor, so to live, that when we die, even the undertaker will be sorry." Mark Twain

paper200
Posts: 264
Joined: Sat Feb 02, 2008 11:40 am

Re: Controlling emotions

Post by paper200 » Thu Jun 06, 2013 5:26 am

Sox - you are between state of saying "enough" and "not enough". Seems like you would like to have more - which means "not enough" so stick to your current allocation for an additional 10 or more years with market volatility ultimately determining actual time.

Even though you work in finance area with knowledge of compounding and saving and asset allocation, you are pleasantly excited about growth of your money from 350k to over 1M in an unexpectedly short period of time. Though 'am giving you advise it was an eyeopener in reading and thinking about what others wrote. Talk about psychology! Thanks for your and other's posts.
Having freedom, food and roof is being 90% lucky in life and so is index investing. So, don't let the remaining 10% bother you.

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