How To Keep Focus When Chaos Surrounds You

By: ispeculatornew
Date posted: 11.28.2011 (5:00 am) | Write a Comment  (2 Comments)

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Have you seen the photo on the right before? Sometimes I find pictures very inspiring and oddly enough, I found this one very relevant to this blog. You must think I’m crazy. Maybe I am but please hear me out a bit longer. If you have not seen this picture before, it was taken during riots in Vancouver following a hockey game (yes, Canadians do take hockey seriously).

This couple made the news because despite that everything that was going around them, they were able to focus on what seemed important to them, their couple. They were clearly not too worried about stealing from shops or engaging the police like so many others were. That is one thing. The more important thing is that they “remained on task” (I’m sure at the time the task seemed very important) when all hell was breaking loose.

I sometimes feel like so many of us can get carried away when circumstances change. Just try watching financial news these days and you’ll hear all of these world ending scenarios that seem so dramatic. Don’t get me wrong, I think the current issues are critical and could have a big impact on the world economy and financial markets. I do however have a question:

“Did you think that big recessions or market crashes/downturns would not occur?

I would assume that we all know that investing in the markets means going through a ride that has its fair shares of ups and downs. If it didn’t, the game would be too easy don’t you think? When I think of my dividend investing approach, my tech long & short stock picks and also the long term speculative stocks, all of these approaches are based on using a fairly strict methodology and I know very well that it’s not in my interest to start modifying it to account for market ups and downs.

We all know what happens to those that panic, they usually end up selling near the bottom and then miss the rally that follows. I’m not saying that you should try to determine the bottom and try buying everything you can put your hands on either. I’m saying that it’s important to keep focus and stay on course when it seems like the world is going to end.

How Do I Remain On Course?

Only invest what I can afford to lose: Investing is great but when you start feeling anxiety about the value of your holdings, it becomes a lot more stressful. I was once told to invest in a way that I can “sleep well at night” and I stick to that.

Avoid Timing The Market: Trying to invest all of my assets at specific times or taking everything out because I fear a crash is coming would almost always be a recipe for disaster, the odds are much better if I stay on course with my investments.

Try To See The Brighter Side: In very volatile markets, many investors panic and that creates a lot of confusion in the markets. One of the great benefits is that certain discrepancies start appearing providing great opportunities for those that are still putting money in the market. Also, if you are putting a fixed amount every month or so, you are likely able to buy at depressed prices which will turn out to be a good thing in the long run.

Diversify My Assets: I’ve said this before but those that stick to only sector in their retirement accounts are crazy. The financial market looked rock solid up until 2008 and then out of the blue, things turned into a real nightmare for investors of companies such as Lehman Brothers, Bear Sterns and many other big firms.

Not Acting Too Spontaneously: The crisis in Europe certainly has big impacts on should change how I personally invest as well but I think it’s very rare that watching a news broadcast will be enough to start shorting specific sectors or companies, etc. I try to be rational about it all and while I do take decisions based on those news, it’s rarely done right away. Having a few days or nights to think things through is rarely a great idea. It’s not a race.

How About Yourself? Any Thoughts On Trying To Stay Focused In Periods Like These?

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  1. Comment by awake — November 28, 2011 @ 11:41 am

    I understand staying the course but it’s easy to panic especially during times like this. With all the talk about bonds, I’m thinking of getting out a bond ETF that is part of my portfolio (BND by vanguard).

    How can one evaluate an ETF like BND properly using your style (dividend yield etc)?

  2. Comment by Intelligent Speculator — November 28, 2011 @ 6:41 pm

    I think you have to evaluate the bond in terms of what a typical bond in BND would look like and assuming that the fund is very diversified. So I would both consider the outlook on bonds (not great), need in my portfolio and also the dividend yield.

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