In the last two days I’ve “lost” a bit over $10,000 in the market. Nothing has changed – the outlook for the companies whose stock I own is about what it was last week, but there were some negative comments from the Chairwoman of the Federal Reserve that moved the market. As the tide went down in some corners of the market, the values of my stocks have gone down as well.
There are lots of things that affect stock prices, which I will be covering later. But one of the key skills of being an investor is the ability to sit back and observe without getting emotionally attached.
Lots of things will cause the market to react, and it can be very difficult to keep one’s head when the market moves in big ways. Especially when you are new to investing, a position is moving against you, and you’ve got no idea why. It can feel like everyone else knows something that you don’t, and the pressure to cut your losses and stop the pain can be incredibly powerful
But almost invariably, as soon as you do you’ll find the market turns around. When you sell a stock that you believed in because it dropped 30% only to watch it turn around and happily rise to new highs, you’ll really feel stupid.
I’m going to address investing a lot here, because I see it as the wealth building method that anyone of average intelligence can participate in. But in order to be successful you’ve got to be able to ignore the day-to-day and month-to-month moves of the market and their effect on your (theoretical) net worth.
That’s it. Nothing life-changing or particularly deep here – I just realized that I was down a lot, and once upon a time this would have caused a great amount of anxiety.