You pull up a chart of the Dow30 over many decades, you'd think any fool can make money just by DCA, and you'd think you can definitely hold thru the shakes.
Now when a shake is actually here, it's not that easy to hold thru right? lol.
There are many factors and coping strategies.
- lack of long term out look - this is probably the number 1 reason. when you buy in, you need to know the time frame. and you can look up historically what are the odds of going under water with 3, 5, 10 year time frames..... so with this mental prep, it will be easier to have a positive outlook. e.g. with 12% annualized return, QQQ should double in 6 years to $300.... so if that's the goal, why does it matter if it drops from 170 to 150.... and by the way, isn't the drop giving you a better price right now?
- personal up-bringing.... how you perceive money as part of your personal belief system.... do you tie every market movement of so much $ up/down to your everyday spending? like you are thinking this market gain/loss means you are gaining/losing houses, vacations, kids tuition? you do that, the market will be like hell..... you have to train yourself to be desensitized to these things.... treat it as a poker game, you pushing the chips in and out.... it's just numbers.. numbers have nothing to do with your lifestyle. In reality, the account balances should have very little to do with lifestyle, what you eat/wear/drive and where you take vacation.... if it does, then you have too much stock in your portfolio... the rule of thumb should be, you don't lose sleep if it drops 50%..... so how much stock you should have in your portfolio? you do the math based on how much loss you can take and still sleep like a baby.
Every person's view on money, and risk tolerance is different..... it's a forever learning process as you go thru every shake, as your account grows ever bigger.... you can look at the SP500 as a bank CD that returns 7% above inflation, provided that it's a very long term CD that you have to hold for many years.... or you can look at the chart every 5 minutes and scare yourself shitless.
You pull up a chart of the Dow30 over many decades, you'd think any fool can make money just by DCA, and you'd think you can definitely hold thru the shakes.
Now when a shake is actually here, it's not that easy to hold thru right? lol.
There are many factors and coping strategies.
- lack of long term out look - this is probably the number 1 reason. when you buy in, you need to know the time frame. and you can look up historically what are the odds of going under water with 3, 5, 10 year time frames..... so with this mental prep, it will be easier to have a positive outlook. e.g. with 12% annualized return, QQQ should double in 6 years to $300.... so if that's the goal, why does it matter if it drops from 170 to 150.... and by the way, isn't the drop giving you a better price right now?
- personal up-bringing.... how you perceive money as part of your personal belief system.... do you tie every market movement of so much $ up/down to your everyday spending? like you are thinking this market gain/loss means you are gaining/losing houses, vacations, kids tuition? you do that, the market will be like hell..... you have to train yourself to be desensitized to these things.... treat it as a poker game, you pushing the chips in and out.... it's just numbers.. numbers have nothing to do with your lifestyle. In reality, the account balances should have very little to do with lifestyle, what you eat/wear/drive and where you take vacation.... if it does, then you have too much stock in your portfolio... the rule of thumb should be, you don't lose sleep if it drops 50%..... so how much stock you should have in your portfolio? you do the math based on how much loss you can take and still sleep like a baby.
Every person's view on money, and risk tolerance is different..... it's a forever learning process as you go thru every shake, as your account grows ever bigger.... you can look at the SP500 as a bank CD that returns 7% above inflation, provided that it's a very long term CD that you have to hold for many years.... or you can look at the chart every 5 minutes and scare yourself shitless.
It's your choice.
although, I am feeling eerie about how popular the passive investing and etf investings are becoming in the market.
the whole credit suisse mess up might be a wake up call...