They say that HODLING is one of the most important skills in investing – particularly in volatility, yet upward moving financial market in today’s inflationary world.
Only through HODLING through big drawdowns (although it would be much better if you don’t have to go through drawdowns), do you get to taste the amazing relief rally that has often rewarded long-term and long-biased market participants that remained invested.
IT IS NOT SURPRISING THAT “TIME IN THE MARKET IS IMPORTANT THAN TIMING THE MARKET”
Often a lot of investors lose money in investing in public market because of emotion-driven selling – you see your portfolio getting lit up on fire and liquidate in order to protect your wealth.
However, sometimes it is not in your best interest to sell – because sometimes you are panic-selling in the middle of drawdown – And a research came out with key risk factors for panic sellers.
While these risk factors are correlation analysis and not suggestive of causality, they still nevertheless are useful for us to understand ourselves in terms of reflecting on our actions during sharp market sell-offs (like during covid19 sell-off in March 2020 and early 2021).
“PANIC SELLERS DURING STOCK MARKET DIPS ARE OFTEN MARRIED MEN WITH CHILDREN”
There are still many families whose father is often responsible for family finance
TURNS OUT THE FATHERS HAVE THE HIGHEST RISK FACTORS – 45 YEARS OR OLDER WITH CHILDREN AND MOST IMPORTANTLY WHO SELF-DESCRIBE THEMSELVES TO HAVE “EXCELLENT INVESTMENT EXPERIENCE”
I honestly don’t know what responders would have meant by saying “excellent investment experience” – if you ask 100 people, you will hear 100 different definition of “excellent investment experience.”
I also personally largely drive investment decisions for our family. I am younger than 40 years old and do not have kids, but I do check two boxes.
- I AM A MALE
- I WOULD ALSO DESCRIBE MYSELF TO HAVE “EXCELLENT INVESTMENT EXPERIENCE”
If you check off many risk factors, you may want to think one more time before you click the sell button when your portfolio is losing money.
Based on this study, it may not be the best idea to give the final decision to wives (just like many other things in life!)
It appears that women are less likely to make impulsive-driven decisions than male – and THIS HELPS THEM AS INVESTORS BECAUSE THEY ARE NOT SELLING.
These are not my words, but are based on study by Amanda Clayman- a financial therapist.
It is getting easier to trade to stocks particularly given free stock trades that are widely available these days.
High portfolio turnover does not necessarily translate to higher return- we should all think more carefully before selling stocks. Maybe we should consider buying and selling stocks like buying and selling watches (like Rolex). Would you trade your Rolex Submariner that quickly?
Or at least, we can just ask our wives before selling any stock.
Best of luck to investing to all of us!
