Damnit! You’ve just bought £1000 worth of shares in some great long term investment company for £1.50 a share, but this morning they are only worth £1.40. You should have waited one more day! Right?
This is what happened to Susie this week, one of my student investors who adds “I was ok with it as I reminded myself what we are aiming for. Mind you, I do love a bargain”.
Susie is currently working on changing this mindset, hence why she’s dealing with it. But it’s a classic example of a typical investor mindset.
Warren Buffet has often said in his interviews “Just because you can get a quote on your shares every second of the day, doesn’t mean you should”.
In other words, having the price of your assets waved in your face every second of every weekday isn’t useful. In fact, he suggests investors would be far more successful if they only saw quotes on their assets once a year.
This is precisely how Nick Darvas grew his wealth to $1,000,000 in the 1950s. As a professional ballroom dancer, he would tour the entire world performing. His quotes would come in from his broker via telegram. Back in the ’50s, these were slow to get around the world. His quotes were often very late. But this detachment from Wall Street was precisely his edge. Instead of jumping at every daily event and move in price, his moves were delayed. Instead of tinkering every few days, he left alone and allowed his funds to grow.
Susie tells me she struggles with the concept of getting in at £1.50 the day before it fell to £1.40 because she loves a bargain. But a bargain was precisely what she got.
You see, back in January 2020, these shares were priced at £3.00 a share. A month where 3.2m of these shares were purchased globally by thousands of various investors. Then the pandemic hit and overinflated share prices fell to more reasonable levels. Some have stayed down there, others have reclimbed already to overinflated prices again.
Just 8 months later she can buy those same shares for only £1.50 a share. That’s 50% off their price back in January. I call that a bargain!
It is a mindset shift—a change in perspective. Yes, had she waited one more day she could have bought at £1.40. However:-
- She had no way of knowing that the price would fall, and there’s little point wasting our energy on things we cannot control.
- She got her bargain, at 50% what the price was in January. She was able to buy double the shares for the same expense. Something that is far more valuable than 10p off the price.
When you have a 10-year outlook on your portfolio, anything that happens to the price in the next 5 minutes, the next hour, the next day, month or even year is mostly irrelevant. The price could rise 10% tomorrow and fall back to its original price the day after.
Are you going to do what 95% of other investors do and strap yourself into that emotional rollercoaster? The ride that will leave you screaming in delight one minute and horror the next? That’s an experience that often leads to abysmal investment decisions being made, usually during the moments of fear. I cannot count the number of amateur investors I’ve seen who during the height of the pandemic sold all their positions out of sheer panic. My Facebook groups were full of “sold this….. I’m selling up, you’re all fools for staying in” type comments. Yet most of these stocks have already returned to their pre-crash prices. It’s those who let their emotions dictate their decisions that end up looking like fools.
No, I’d advise against getting on that ride and instead focus more on the only thing that’s truly important about the shares (assets) which you are buying….How much will they be worth when you want to sell them?
You don’t buy a house and then check the market every hour to see what it’s worth. If you do, you’re a nut. You don’t invest in rare coins and check their value every day. The same should be assumed with your shares. Don’t buy stocks and then check their quote price every day.
Just because you can, doesn’t mean you should.
Focus on the long term view when buying. If I get in today at today’s price, what will they likely be worth in 10 years time?
I’m looking for student investors who want to work with me. To find out more check this link. https://thecleantrader.com/im-looking-for-investing-students/