3:00 PM – Log into trading account. Check positions. Check balance. Close window.
3:03 PM – Reopen window. Log into account again. Check positions. Check balance. Close window.
3:07 PM – Attempt to start a project at work. Fail. Open window. Log into trading account. Check positions. Check balance. Close window.
3:16 PM – (See last 15 minutes and extrapolate….)
Sound familiar? Is this what you do? Are you constantly checking your account balance minute after minute, day after day, wasting your time and probably killing your returns?
Chances are you’ve read an article by now on teenagers’ addiction to social media. Or more likely, you’ve watched your own kids waste their time on sites like Instagram and Twitter. They can’t stay off their damn phones. Constantly logging on and checking for updates. Did their friends like their photo? Did someone retweet them? Every time they log on they’re hoping and praying for that little bit of action.
And oh the joy when they do see that notification! That little red number in the corner of their screen that they click for an instant dopamine shot. That’s what it’s all about right?
It goes back to basic psychology. Social media companies know it well. They train their users like Pavlov trained his dogs to salivate at the sound of a bell. It’s easy. Have your users yearn for that bell, or in this case that notification, and make them come back to find that stimulus over and over again. Each time they see that notification and click, dopamine gets released in the pleasure center of their brains. It makes them feel all nice inside. Sure enough, they slowly become addicted. Oh those poor kids….
But wait a minute. This isn’t all that different from “old school” services like email is it? We all know people who can’t help but check their email nonstop. And the problem only got worse when they could finally do it from their phones. Anyone remember the term “CrackBerry”? There’s a reason BlackBerry phones earned that title….
It’s the same thing as social media. The instant gratification of opening a new email is addicting. It triggers the same dopamine loops.
Now carry this a little further. Do you see it now? It all goes back to why you’re stuck checking your account balance so much. It’s addictive! You’re scratching that dopamine itch!
But why fall for this? Why become an addict? The whole reason you invest in the first place is for financial freedom. You’re in the markets to make a return on your savings that will help you to live the life you want. So you can hit the links when you want. So you can take a day off when you want. So you can be free! So why be a slave to your account balance?
It’s alright. We know you’re probably a bit embarrassed at falling victim to the same thing as your kids. And of course it’s not fun coming to the realization that you’re basically a slave to your account. Now we would love to say that’s it. That it doesn’t get worse. But unfortunately, there’s more. A fixation on account balances causes a few other major problems.
For one, it’s stressful. Checking your account too often will expose you to every fluctuation in the market. A cent here, a dollar there. Gains and losses. Red, green, red, green. If you’re looking for some anxiety, you’ve found the right place. It’s enough to drive you crazy!
Profitable investors know these tiny day-to-day fluctuations don’t matter. It’s the larger trend that matters. And as a knowledgeable investor, you know this too. But if you’re continually checking your account, these fluctuations start to affect you regardless. You start to care about pennies. You worry if maybe instead of market noise, you’re actually seeing the beginning of a new trend. You start to get feelings that “this could be it!”. But at the same time you know you should stick to your investment plan. So now you’re conflicted. You suffer the constant push and pull of knowing what’s right, but feeling something wrong. And the more you check your account, the more you struggle.
This constant struggle will wear you down. Mental stress is no joke. You start to feel anxious all the time. You don’t sleep well anymore. You start having trouble at home. Your boss is on your ass at work because your project is late. And all because of your investments? Once again you become a slave to your money instead of a master of it.
But it doesn’t stop there. If you’re dragging around this huge mental burden all the time, there’s no way you can make good decisions. So now you’re sitting at your computer sweating, with your finger on the mouse. Should I exit this position? Should I keep it? Should I buy Apple? Man, oh man. Pressure is on right?
This is usually when sound analysis and proper decision making go out the window. You abandon your carefully crafted investment plan and let your emotions take over instead. Things begin to fall apart. You start making buy and sell decisions in an emotional, worn down state.
And guess what? Your decisions suck. You lose money here, there, and everywhere. And now your returns for the year are shot. After you spent all this time worrying and thinking about what to do. Especially when you really should have done nothing and just followed your investment plan. But now look what happened. So much time and energy wasted! Not to mention the stress! Just for you to screw it up in the end. And it all started because you checked your account too much….
What a shitty scenario right? So many problems. Not fun at all. You don’t want this happening to you.
Fortunately, it doesn’t have to! There’s a solution to this madness. And it’s pretty simple….
The trick to avoid this self-torture is to extend your investment timeframes!
At Foundation, we only evaluate our investments on a week-to-week basis. This means we have no reason to check our account multiple times a day. Intraday price movement doesn’t matter to us. Even day-to-day price movement doesn’t matter too much.
The key is the closing price at the end of the week. This goes for both our current investments and any potential ones we’re looking into. Our method requires us to only open our account once a week.
But you may be wondering, what if something major happens in the middle of the week? What if the sky starts falling? Well there’s an easy solution to that.
All modern trading platforms allow you to set alerts. Your brokerage will send you a message at whatever price you tell them to. If alerted, you can then login to your account and calmly make a decision. Otherwise you can keep a safe distance from the whole thing.
Extending your timeframe causes the stress of the market to melt away. By only checking your account once a week, you’re protected from the daily market fluctuations that drive others crazy.
It’s funny how the financial media tries to attach meaning to the daily moves in the market. Their efforts are always a waste. It’s almost like trying to understand the rules of one those crazy Japanese game shows. In reality, no one knows what the hell is going on! It’s just nonsense!
Think about the turbulence in a glass of water. The most powerful supercomputer in the world can’t even calculate the variables involved in that “simple” process. So do you really think you can interpret something as complex as the market’s daily movements? The number of variables involved are pretty much infinite!
Why waste your time and energy trying to understand that? By avoiding this futile analysis, you avoid those conflicting feelings mentioned earlier too. There’s no need to try and discern if today’s tiny move is the start of something bigger. That’s something you can only pinpoint in retrospect anyway.
It’s important you understand this. You need to move past day-to-day fluctuations. It will help you suppress the temptation to drift away from your investment plan when you “feel” something big about to happen.
With fewer conflicting feelings, you’ll also reduce mental struggle. With less struggling, you won’t be as worn down all the time. You’ll be a better person!
You’ll finally sleep well at night. Not only because your anxiety is gone, but also because things at home will become better. Your spouse will let you sleep in the bed again! The couch was not too comfortable….
Plus your boss will return to liking you and may even put you up for a promotion. Your investments will finally stop making your life miserable.
This calm mental state will also lead to better decision making. Think about how you approached the market before. In an anxiety ridden state with a diabolical need to click the mouse and do something. You were making emotionally charged, bad decisions.
But things change once you’re mentally secure. You’re less emotional and more rational. You’re able to calmly make decisions while sticking to your investment plan. In this mental state, you’re far more likely to make the right decisions to create better returns.
Pretty nice, right? Yes sir. And it gets even better.
Longer timeframes also increase your chances of success beyond just good decision making. This is due to the noise to signal ratio in the markets. The longer your timeframe, the less noise you encounter.
Longer timeframes give you more reliable signals of something real happening in the markets. For example, a breakout on a longer timeframe is a lot more useful than a breakout on a shorter timeframe.
The longer timeframe breakout gives you a big picture view of supply and demand forces in the market. It clues you in to where the biggest trends are forming. A shorter timeframe breakout is usually just noise. It’s just money managers positioning this way and that way. Traders chasing prices back and forth. Nothing too meaningful.
As they say, it’s important to not lose sight of the forest by focusing too much on the trees. Sticking to longer timeframes will make sure you focus on the big picture trends. Not the little fluctuations here and there that will just distract you. The big trends are key. You’ll make the big bucks by riding them.
The goal of investing is financial freedom. You should be the master of your money, not a slave to it.
It’s time to kick your “account checking” addiction. It doesn’t make sense to deal with the stress and crappy returns that come from day-to-day market movements. Just extend your investing timeframes. Not only will your reduce your stress, but your returns will improve too.