*** From https://blog.rwbaird.com/. Bookmark it to see all posts by Michael Antonelli! ***
I’m going to come right out and say this: pineapple on pizza is good. You know what else is good? Cholula on eggs, jalapenos in Margaritas, peanut butter on hamburgers, and dipping fries in ranch.
You might think those are gross, in fact even mentioning pineapple on pizza is bound to land someone in a 30 minute argument with a pizza purist. But you know what? I don’t care, I like it, and that’s all that matters. I’m doing my thing here with food because it suits who I am, just like my investments.
I have a diversified portfolio of bonds and equity funds that I’m using to reach my goals. I also own a handful of single names because I believe they are good companies, with great leaders, growing their business over time and I want to participate in that.
These investments are going to be held for DECADES, I am using them to help pay for college, retirement, and future medical costs. Why do I care what happens to the price of Apple or Disney or the S&P500 today, tomorrow, next month, or next year? I am playing my game and my game only.
The biggest trap investors fall into is looking at someone else’s game and saying “what’s going on over there, should I be on their playing field?”
“This person on TV said Apple is overpriced”. Ok, great, is it overpriced for a day, a week, a month, a year, 10 years? Time frame matters to this statement. Do you think the people on financial television know what strategy you are employing to reach your goals?
Day traders care what happens to the price of Apple today or tomorrow. Other traders might care what happens to the price this week or next. Portfolio Managers might care what happens to it over the next few quarters or a year. All of these people are looking at the price of a stock or an index and attaching their strategy to it.
Should you care that I like pineapple on my pizza? No. Should you care what a day trader thinks the value of Apple should be tomorrow when you are invested in it for different reasons?
How many times a week do we think Warren Buffet opens a web browser and frets over the price of his holdings? Zero or Zero? He built a strategy that was inside his circle of competence and sticks to it for the long run.
Does he add and subtract along the way? Absolutely, in fact when the market crashes he rushes in to find deals while everyone else runs out of the store. But he is thoughtful about executing HIS plan and filtering out what other investors are doing.
I’m not saying there’s never a reason to be worried about a stock or an investment, I’m saying that you need to be focusing on your game and not someone else’s. If your reasons for owning something change then fine, at least you aren’t looking at what other people are doing and assuming they are right.
Literally no one knows what the future holds, especially in the stock market. Why? Because it’s a complex adaptive system where tiny changes cascade through the system altering its course instantly. Subtle changes in expectations happen nonstop so it’s literally impossible to know what future prices will do.
Imagine a room of forty 3-year-olds stuffed with toys and candy and obstacles and juice boxes, do you think you could predict what they will all do? Each one of them is changing their behavior every few minutes, bouncing from thing to thing, going right and then going left. It’s the same with stocks.
Since that’s the case the best you can do is have a plan that is true to who you are and stick to it.
Stop looking at what other people are doing and focus on yourself. You do you.