I Lost Some Money In The Market?

Question

I lost some money in the market today and am pissed because I got greedy and didn't sell when I was up. How do you deal with that kind of frustration?

Answer 1

I tend to throw darts at the Wall Street Journal after losing a big position. After you throw a few you realize its not so bad, because tomorrow you'll be twice as aware, and end up making more money tomorrow than, you would have made today!

Answer 2

The real lesson to take away from this experience is that your investments shouldn't be structured so that a one hour delay in selling will turn a gain into a loss. No one in the world can predict the market's direction in the course of an hour, or any other short period of time.

It doesn't sound as if you will turn into a buy-and-hold investor overnight, but I suggest you at least increase your time frame to a few months. Buy stocks that you have some faith in and hold them until you see where the market is taking them. What happened today was that you got zapped because of some irrelevant trading "noise" which has nothing to do with the fundamental value of your stocks.

Answer 3

Unfortunately you just have to get used to it. The market is volatile and over the short term especially its really hard to predict where a stock will go.

I don't think there's one investor out there who hasn't at some point or other wondered to themself 'why oh why didn't I sell X when it was at Y.' (Any my own most painful examples would probably be OVTI at 33, and ASPV at 22.5) So you at least have plenty of company.

Also you didn't get greedy, you just didn't think the stock was going to go down. If the fluctuation was small, (ie a couple of percentage points) don't worry too much, the stock could easily go back up tomorrow. If it was larger try to learn from the mistake--go back and see what warnings, if any, there might have been so you won't ignore them again.

And remember that occasional price drops are the price you pay for holding what should, over the long term, be much more profitable investments than just leaving your cash in the bank.

Answer 4

First, let me suggest a book -- Beyond Greed and Fear by Hersh Shefrin. The book covers behavioral finance and explains how our emotions get in the way of making good investment decisions. I put a link from Amazon below, but you can buy it anywhere.

Second, Nasim Taleb gives an interesting anecdote in his book, Fooled by Randomness. I'll paraphrase it. Suppose a trader has a winning strategy where he makes a 2% return 52% of the time and loses a 2% return 48% of the time. With that very slight edge, the trader will make over 22% per year, on average. However, on any given day, the trader will have nearly a coin flip to win or lose money.

Our brains are very asymmetric when it comes to losing. We get a nice feeling when we win and feel really rotten when we lose. The rotten feelings from losing are cumulative, so at the end of a year or two, our trader friend feels absolutely terrible after having a terrific run! He quits due to exhaustion and burnout.

The lesson of the story is to try to re-frame the way you look at your performance. Try to deemphasize daily performance. Try to turn your quarterly performance analysis into an event. Try not to focus too much on the day-to-day.

Some of my friends deal with their feelings via exercise, a putting green at the office, or some other mechanism to break their fixation on the markets. Others, regrettably, drink, gamble, or chase women (or men). I suggest healthy distractions.

Good luck.

Answer 5

Learn from your experiences and realize that stock investing involves both ups and downs. A great investor once said that it is an investor's duty to take losses from time to time and not get upset about them.

Read Benjamin Graham's book, "The Intelligent Investor". He offers very practical ways to deal with the emotions of stock investing. You must learn to ignore current market conditions and stick to your plan if you want to be successful in stock investing.

Answer 6

Stocks go up and down. If you're looking for it to do nothing but go up, don't invest in the market. Stocks are a long term investment. They aren't a bank account with a guarantee. Sounds like you invested when you didn't know anything about it. Educate yourself before you invest.

Answer 7

The first thing to do after buying ANY stock is put a stop loss order in right away. Small losses are easy to make up - large ones aren't.

Answer 8

It's water-under the bridge. Note what you did and remember the loss to put on your 2007 income tax filing.

Take a deep breath and move on to the next opportunity.

Good Luck.

Answer 9

Did you sell at All?

If you didn't sell you didn't lose a cent.
How to deal with it?? :tnme know when you figure it out, because we all screwed up this way at one time or another.
Forget it, move on.