Some of the biggest mistake’s investors make is how they react to market optimism and pessimism.
Over the course of decades, we have seen people add to or completely liquidate positions because of:
FOMO Buying
Panic Selling
Presidential Elections
Influencers
Headline reactions
This is just the short list. I am sure you know of someone who has done one or more of these things. Even seasoned professionals can be blind sided. Or it could have been yourself… I’ve been there before too.
However, these decisions all have something in common:
IRRATIONALITY
When you start to tinker with your strategy because of irrational behavior, you will leave returns on the table. Don’t be the guy that got out of the market because Obama got elected. And don’t be the guy who got out because Trump got elected either.
“This Guy” missed out on a huge bull market because of…well lets face it…he thought the end of the world was coming. Political bias got in the way of looking at the bigger picture of
Quantitative easing and its unprecedented market support
Unemployment and its correlation to returns
Extreme pessimism (VIX Index)
Market Valuations
So how do we manage this behavior? These are 5 simple things any one can do. They are efficient and will ultimately lead you to better decision making.
1. The Sunday Rule
What: 15 minutes every Sunday to review investments
2. The 24-Hour Pause
What: Mandatory one-day wait before any trade over $1,000
3. The 3-2-1 Portfolio Check
What: Quick monthly overview
3 largest positions
2 worst performers
1 action item (if needed)
4. The "Money Morning" Rule
What: Do investment tasks before 10am
Avoid emotional end-of-day trading
Make decisions with fresh mind
Skip days when you can't do morning review
5. The Two-Tab Rule
What: Limit research sources
One tab for price/charts
One tab for news/research
Or you could just Subscribe to The Anti Advisor :)
