If You Can Invest $1k and Sleep Like a Baby When It Drops to $900, You’ll Be Wealthy One Day
Actionable tips for staying focused long-term
Beginner investors go through the same learning curve once they buy their first stock.
It feels exciting to buy 100 shares of company X by clicking a button on your phone. You’re an investor.
Your brain messes up your long-term strategy the moment you see your stock has gained a few percentage points the next day. And the next.
You can turn those paper gains into cash so you sell. Now it’s time to make more money. You buy your second stock and sell it for profit too. Nothing could be easier.
Then the losses begin. Stocks also happen to go down, and if all you do is read CNBC and trade on your phone, you’ll inevitably end up on the losing side of the market.
You have the willpower to stop this insanity after a few failed trades. It’s a transformational moment because you begin to ask the right questions like
“How should I invest to make money consistently?”
By being a long-term investor. But it comes with its own baggage of mental challenges.
Today’s market swings are a data point you’ll forget tomorrow
Once you invested, your net worth is never constant.
Nothing new here. Yet people lose focus when they see their accounts swing up and down daily.
When you see paper gains, you’re tempted to sell your stocks and lock in that $1k profit. Not bad.
But the money is gone once you’ve paid the capital gains tax and bought a Lenovo ThinkPad. It makes no sense unless you desperately need the ThinkPad.
It’s not investing, it’s trading.
The stock market is automated now. 80% of all transactions execute based on pre-set buy and sell orders.
Most orders barely move the price. It seems nobody is buying while large investors like BlackRock are accumulating millions of shares. They can buy them slowly (over several months) so nobody will notice.
If you try to trade this, you’ll lose money and time.
Now the real mind f*ck is to stay invested after your account has dropped. Beginners see pullbacks like the end of the world.
A lady I know said she regretted her paper losses. She wished she’d bought a pair of red high-heeled leather boots for winter instead.
The whole point of investing is to make money long-term regardless of the occasional ups and downs. What happens today won’t matter in a year.
Your life is full of ups and downs.
You may wish your spouse a beautiful day in the morning (“up”) and quarrel with them at night (“down”).
Some days you crush your workout in the gym, other days you miss and feel guilty.
You may produce your best writing in the morning when the world is asleep while evenings mess up your creativity.
You can’t put a price tag on these but the stock market gives you stock prices at any time of the day. It’s easy to freak out if you check them so often.
Here are three actionable tips for staying focused long-term.
Earn an emotional high
I find it life-changing to exercise in the morning.
Staying slim is good but the biggest benefit of physical activity is stable mental health. I’ve had romantic break-ups, been told off at work, and got insults thrown at me by Internet users.
Workouts alleviate the effects of life’s downturns.
I may have no time for checking stock prices on a busy day. But I’ll wake up 4:30 am and run for an hour no matter what.
Chase the dopamine hit you get from moving your body.
If they have no clue, why do you listen?
Polarizing is the easiest way for the media to make money.
The media divide the world into black and white. You have to take a side. So you see sensational headlines even though the story behind could be complete bullsh!t.
Spicy headlines = attention.
The world is never black and white. The global economy is complex.
Russia faced monster sanctions after the start of the Ukrainian war. Yet it initially profited from the soaring oil and gas prices. The extra cash fueled the military machine (even though the sanctions eventually hurt the Russian economy).
Michael Burry, Dr. Doom Nouriel Roubini, and Jamie Dimon take pleasure in predicting doom and gloom. In reality, few people have a clue.
Ignore the news that makes you emotional.
You made a plan so follow it
Occasional recessions are nothing new, and if you’re older than 17, you’ve been through two (in 2008 and 2020).
It’s hard to see your portfolio in the red when the market crashes. So you should recall what you promised yourself when you were starting out.
The best decisions are made when you’re not emotionally attached to the number of zeros in your investment account.
My colleague Christian is a millionaire. He’s an electrician, one of the three in the laboratory allowed to work with high voltages. Work is fun for him because he loves electric circuits.
Christian is a simple guy who makes less than any professor in our research center. Yet people talk to Christian about their finances.
Right after Germany reunified in 1990, my colleague began to invest. He promised himself he’d hold his stocks through recessions as long as he still believed in the respective companies.
Christian survived the dotcom crash, the Great Recession, and the Covid crash.
Here’s my point: You shouldn’t give a f*ck about recessions.
How wealthy you’ll retire depends on what you’re doing now. Selling your stocks in panic means losing money or making minimal gains (and paying taxes on them). Those who panic wait months and years before getting back in and miss out on the biggest returns.
You decided to be a long-term investor at the outset. Stick to your plan.
Add to your account when the market nosedives and when it soars.
The bottom line
Investing is psychology.
You can be your best friend or worst enemy in the capital markets. It boils down to what you (don't) do when things turn sour.
Follow these tips to let your portfolio run:
Use workouts as a mental escape
Ignore the news or at least don’t read opinions
Develop a plan you’ll follow no matter what
“Investing should enhance your life, not consume it.” - my stock market teacher.
This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.
P. S. If you want to find five stocks that grow without messing up your sleep, my “Smart Money Investors” program will help. Trump has created investing opportunities. I’ll teach you to see them without doing hour-long deep dives.
Reply “Smart money“ and I’ll send you the details. Capped at three spots.
I had that mindset too. Wish that I get to spend the money rather than to lose it in investment
Great article Denis (as usual). I love it when I hear people like Jamie Diamond go in "crisis" mode. The more "experts" I hear getting pessimistic the more excited I become. The final straw is when Time Magazine (a long time general interest magazine here in the US) has a bear on it's front cover. As Warren Buffett said, "I buy when there's blood in the streets." To me with over 40 years investing experience that is when I start to buy. I'm not going to get the bottom but I know I'm close. Hope you and your family are well. Much fondness to you my friend. Rodger