Habits and Addictions are two terms we use in many contexts in our daily lives. At the root of it, it is and action/activity that one has to do at regular frequency or in certain way or at specific time, etc you get the point right. Now, if those necessary activities or actions are good we call it habits (in most context), and if those activities or actions are bad we term it as additions. In investing, we individuals need to develop habits.
I have seen lot of people who are so obsessed with market or SENSEX that they keep following hour by hour, on SMS’, on computer, and what not. They do not lose a single opportunity to see what’s happening to their stock holdings. If they are working on computer, they keep ticker monitor or browser window open to keep track of SENSEX movements. We all know that in short term markets are going to behave irrationally. You do not hold Index Funds or ETFs, and are still worried about what is SENSEX or NIFTY doing? How is holding individual stocks related to index? Index is a weighted average, and hence will have stocks above average and below average. If you are constantly watching and tracking your stocks, you will make an emotional decision. You may sell at wrong price or you may get rid of that good stock, or you may just buy a crappy stock. Irrespective of what it is, addictions are bad. And this addiction to keep track is bad for investing success.
In order to succeed in investing and sustain your success over a period of time, you should focus on developing habits. Focus on doing your homework and select solid companies and select good track record. Long term investing (with asset allocation) is the only free lunch you will ever get. The day-to-day movement in stock price of solid companies (like stocks in TIPBlog portfolio) is not going to make or break the company.
Sometimes there is a very fine line between habits and addictions. I know I like to keep thinking, reading, analyzing, and writing about economy and businesses. It has been a general habit. Since I have started this blog, my wife has decreed that I am obsessed with blog. I have already been warned that it’s growing into a full blown addiction.
Well, who am I to argue with the boss. Isn’t boss always right. Yes Ma’am, I have an addiction. I am a blogaholic. So what’s the cure?
beginners guide, long term investing, long term sustainability, market addictions, stocks