Questions for seasoned traders and investors

General
5

Hi @zoomtrader, sharing the following in good-faith.
Maybe you are already practicing some of what’s discussed,
If so, we can discuss that instead, and build upon it.

If you are not a fan of the Socratic method or find that triggering,
feel free to ignore the following…

TL;DR: Personal finance and Investing from first principles.

…and you might be feeling disappointed thinking you screwed-up.
Maybe so, maybe not. We’ll see.

Next month, when markets crash again, harder,
you will feel a sense of smug satisfaction, and feel smart.
Maybe so, maybe not. We’ll see.

The parable of the Chinese farmer comes to mind -

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This is classic market psychology.
One sells, the market rallies, and now one is kicking oneself.
Hindsight is 20/20, and the market’s job is to make one feel like an idiot one day and a genius the next. The aim is to NOT get caught in this mental-trap.

The bigger picture is that the current markets aren’t normal predictable markets.
(not that they are most of the times anyway :sweat_smile:, but are especially volatile right now)

Given all the major global cross-currents,

  • “Buying the dip” wasn’t a sure thing; it was a gamble on sentiment.
  • Selling wasn’t necessarily wrong; it was a defensive move in a tense environment.

IMHO, a potential challenge with the framing of questions in the original post above,
is that the direct answers to those questions won’t be particularly important in the overall scheme of things.

To borrow a couple of terms popular from RTS gaming circles,
those questions are focusing on the “Micro”,
whereas what is missing is the “Macro”.

  • Micro / Tactical activities in investment

    • Stock/Fund picking,
    • Market timing
    • Quickly reacting to news,
    • Technical analysis,
    • …

  • Macro / Strategic activities in investment

    • Setting financial goals
    • Determining Risk tolerance,
    • Asset allocation,
    • Monitoring Broad economic Indicators,
    • Rebalancing one’s portfolio,
    • …

All those questions in the original post,
can be truthfully answered by folks with varying degrees of -
“Yes. Do that too. A little bit. Diversify. #”
And they will be right.
Anything beyond that depends on one’s personal finances and goals.
# - FWIW, Looking at a recent post, you seem to be doing this already. So, that’s good. :+1:t4:

A alternate, more effective thought-process would be to build a strategy that’s so well-aligned with your personal finances and goals that you can stick with it throughout the inevitable chaos.

Why?
Was it because you could not afford to lose the amount that was invested in volatile equity? Did you need that amount in the near future for some goal / life-event?
…or some other reason(s)? What? :thinking:

Why? What’s your end-goal?

  • Most folks reply with “Generate a lot of wealth”

    • Which is not a sufficient level of detail. We need to go deeper.

  • Once we have clearly thought through and established a set of goals,
    then we can build upon it and derive the rest,
    including a suitable investment strategy for oneself,

    The advantage of such a strategy is that it will be something that
    one WILL be able to stick with, through ups-and-downs (in market and in life).

Here’s some recommended reading that helps on this front.
(in case haven’t come across them yet)

Note: Both of these resources are hours/days of reading/pondering over.
Can start slowly and tweak one’s investment strategy as one gets more clarity over time.

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