I take smaller risks with more anxiety than I did when I was younger. Why?
I like big bets and I cannot lie.
I bought stocks with years of saved up lunch money, driven by my grandfather's tales of short-selling with chums. In his day, trades took place over cigars and cognac at the turf club, rather than between dual-screens grinding goal-seek formulae. Even then, when I first bought in, there was no central clearing house and I still had to read the newspaper for prices.
I bought a house. Correction: I bought a mortgage which bought a house, just after the dot-com crash when a few years' work could save you a deposit, but no one was buying because the future was cloudy and we could be all in the Matrix.
When U.S. boots hit Iraqi ground in 2003 I decided it was a good time to sell high, buy low, and completely restructure my portfolio.
Now it's 2019 and I've just bought into the trade war. Sure, I've stayed in character, but on absolute as well as proportional terms, my bets have gotten smaller and more conservative.
And yet I feel worse making them.
Where once I dropped $60K with steely-jawed confidence that remedying home country bias ASAP was necessary, now a few measly $9K parcels into sovereign bonds leave me queasy.
I know, right? Sovereign bonds! If they go down, so theoretically go entire issuer nations. I feel insecure betting that literal blood in literal streets will not happen. Contrast this with uni student me being totally fine with buying fly-by-night second-tier shares on nothing more than broker recommendations.
Why am I becoming more pussy over time? And if I knew why, what could I do to offset it?
First, possible causes:
Ego. I now have a self-image as an informed and moderately successful investor. Therefore, the fear of even short term paper losses is higher.
Once bitten, twice shy. Losing hurts more than winning delights, and I have lost big. Let me count the ways: a privatised national telco, a publicly listed law firm.
More to lose than gain. I don't swing big because I don't need to swing big. The blogs I read remind me that getting wealth and keeping wealth are two different skill sets, success in one laying the seeds for failure in the other.
Knowledge. With hindsight I can see why the choices I made worked out, but how they could have turned out horribly is also apparent. The catch is that I would not have known any of this when making those decisions. My youthful swagger was more ignorance than pluck. The more I know now how dependent my fortune is on luck, the more I fear bad luck. Cowards die many times, shyeah, but narrowly avoid multiple portfolio extinction events and see if you don't become one.
I'm alone. In phase one of my investing adventure, my broker and I sat down before paper analyst reports (for which I paid handsomely because there was no alternative to full-service brokering). In phase two I talked with well-informed friends. Now, it's just me scouring listings for opportunities that fit more complex portfolio gaps. My wife provides amazing insight on the occasions I can bribe her with backrubs or wine. But apart from that, there's no feedback anymore, no reinforcement, nothing.
Add to this:
Physical changes which link aging to pessimism and thus conservatism.
OK, now for what I can do to address this debilitating fear of consequences:
Foster other identities. That doesn't mean buying an Estonian passport, but building an image of myself separate to investment and wealth. I'm also a husband. A martial artist. A musician. The fact that this seems like a cop-out probably means that it's a wise thing to do.
Focus on wins. Take some time to be grateful for them. Realise that they are to some extent inseparable from the losses. Again, the fact that it feels like a cop-out, or beside the point, means that there's something more to this tactic than meets the eye.
Focus on losses. Remind myself that I don't have a track record of making bets big enough to sink me.
Punishment. Loss aversion means that punishment is a valid tactic for behaviour modification. It's worked before to ensure I keep allocating from cash. No PS3 until you've placed that order.
Ignorance is not an option. Knowledge has allowed me to improve my diligence. And even if it's not foolproof, I'm grateful for it, and wouldn't want it any other way.
Well, maybe a little ignorance is an option. Maybe all that racetrack XO was good for something. Dutch courage is a thing, as is numbing out losses in the coming weeks. I just drank a fifth of vodka. Dare me to buy?
Accept the discomfort as part of life. It's inconceivable that someone as savvy as Caesar did not heed the warnings or foresee the knives out for him. Perhaps the valiant die as many deaths as cowards do, but brave the Ides of March anyway.
Extra Credits:
It's come to my attention that perhaps I am fearful and critical of choices because I have been conditioned to want to be fearful and critical of my choices. Whoah. That's way too much to process right here, but I just thought to mention it in case it's something that resonates. I'm going to work on it offline.
 |
| "Why are you like this?" |
I like big bets and I cannot lie.
I bought stocks with years of saved up lunch money, driven by my grandfather's tales of short-selling with chums. In his day, trades took place over cigars and cognac at the turf club, rather than between dual-screens grinding goal-seek formulae. Even then, when I first bought in, there was no central clearing house and I still had to read the newspaper for prices.
I bought a house. Correction: I bought a mortgage which bought a house, just after the dot-com crash when a few years' work could save you a deposit, but no one was buying because the future was cloudy and we could be all in the Matrix.
When U.S. boots hit Iraqi ground in 2003 I decided it was a good time to sell high, buy low, and completely restructure my portfolio.
In 2009 I decided to load up on international exposure. Yeah, THAT 2009, when we were still too scared to lift the floorboards of the global banking system in case more rot had set in.
Now it's 2019 and I've just bought into the trade war. Sure, I've stayed in character, but on absolute as well as proportional terms, my bets have gotten smaller and more conservative.
And yet I feel worse making them.
Where once I dropped $60K with steely-jawed confidence that remedying home country bias ASAP was necessary, now a few measly $9K parcels into sovereign bonds leave me queasy.
I know, right? Sovereign bonds! If they go down, so theoretically go entire issuer nations. I feel insecure betting that literal blood in literal streets will not happen. Contrast this with uni student me being totally fine with buying fly-by-night second-tier shares on nothing more than broker recommendations.
Why am I becoming more pussy over time? And if I knew why, what could I do to offset it?
First, possible causes:
Ego. I now have a self-image as an informed and moderately successful investor. Therefore, the fear of even short term paper losses is higher.
Once bitten, twice shy. Losing hurts more than winning delights, and I have lost big. Let me count the ways: a privatised national telco, a publicly listed law firm.
More to lose than gain. I don't swing big because I don't need to swing big. The blogs I read remind me that getting wealth and keeping wealth are two different skill sets, success in one laying the seeds for failure in the other.
Knowledge. With hindsight I can see why the choices I made worked out, but how they could have turned out horribly is also apparent. The catch is that I would not have known any of this when making those decisions. My youthful swagger was more ignorance than pluck. The more I know now how dependent my fortune is on luck, the more I fear bad luck. Cowards die many times, shyeah, but narrowly avoid multiple portfolio extinction events and see if you don't become one.
I'm alone. In phase one of my investing adventure, my broker and I sat down before paper analyst reports (for which I paid handsomely because there was no alternative to full-service brokering). In phase two I talked with well-informed friends. Now, it's just me scouring listings for opportunities that fit more complex portfolio gaps. My wife provides amazing insight on the occasions I can bribe her with backrubs or wine. But apart from that, there's no feedback anymore, no reinforcement, nothing.
Add to this:
Physical changes which link aging to pessimism and thus conservatism.
OK, now for what I can do to address this debilitating fear of consequences:
Foster other identities. That doesn't mean buying an Estonian passport, but building an image of myself separate to investment and wealth. I'm also a husband. A martial artist. A musician. The fact that this seems like a cop-out probably means that it's a wise thing to do.
Focus on wins. Take some time to be grateful for them. Realise that they are to some extent inseparable from the losses. Again, the fact that it feels like a cop-out, or beside the point, means that there's something more to this tactic than meets the eye.
Focus on losses. Remind myself that I don't have a track record of making bets big enough to sink me.
Punishment. Loss aversion means that punishment is a valid tactic for behaviour modification. It's worked before to ensure I keep allocating from cash. No PS3 until you've placed that order.
Ignorance is not an option. Knowledge has allowed me to improve my diligence. And even if it's not foolproof, I'm grateful for it, and wouldn't want it any other way.
Well, maybe a little ignorance is an option. Maybe all that racetrack XO was good for something. Dutch courage is a thing, as is numbing out losses in the coming weeks. I just drank a fifth of vodka. Dare me to buy?
Accept the discomfort as part of life. It's inconceivable that someone as savvy as Caesar did not heed the warnings or foresee the knives out for him. Perhaps the valiant die as many deaths as cowards do, but brave the Ides of March anyway.
Extra Credits:
It's come to my attention that perhaps I am fearful and critical of choices because I have been conditioned to want to be fearful and critical of my choices. Whoah. That's way too much to process right here, but I just thought to mention it in case it's something that resonates. I'm going to work on it offline.
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