Reading Time: 5 Minutes
“Hurry up and get ready!”
“Yeah, I will – but gimme some TIME!”
“How long do you need?”
So went the terse conversation between MrsFrugalSamurai and I just then.
You see boys and girls, I’m writing this as we prepare to attend the wedding of our friend Juju.
That is, I’m writing, MrsFrugalSamurai is preparing.
So for the last hour and a half, I’m just waiting like the sucker I am…
Waiting… waiting… which reminds me of something…
I’m also waiting on something else.
I’m waiting to claw some of those dollars and cents back from the recent stock market carnage!
So excuse me if I do sound a bit curt with my wife – lovely and attractive as she is.
But the recent drops just been brutal ain’t it guys?
I mean, officially most major markets around the world have entered a technical correction (10% drop) and well on their way to a technical bear market (20% drop).
There’s been many reasons put forward – the Federal Reserve lifting interest rates, emerging market economies faltering, instability in the Eurozone, China slowing down – that and more.
Here in Aus, you can see from the chart that the markets have dropped around 10.8% from their September highs.
And see that little up tick in October?
That’s when I got in – thinking I could make a quick buck.
You know in hindsight, the reason for the trade is one of the most dumb, stupid and idiotic reasons I could think of.
“I wanted the stock market to pay for our holiday”.
Leading up to the December holiday season, me in my arrogance – thought that I could do a quick smash and grab job in the markets.
The trade went well for a day or two… and then…
…$3k in the red at the moment.
The most silly thing about this is that personally, I’m quite bearish on the overall market as a whole, which makes it worse.
Yep – very ashamed to admit this to you all, but that’s the truth.
But enough moping, where to from here?
The only bit of good news in this is that the actual company I chose to invest in is one of the most solid out there in the market.
It’s share price was battered around a fair bit but I am fairly confident that given enough time, it will bounce back.
That’s one of the primary reasons I got into this trade – a good company, solid cash flows, well known and respected name with a depressed share price.
If I do choose to hold… how long do I have to wait for it to bounce back?
Sell! Sell! Sell!
Alternatively, I can cash out of it now and run away with my tail between my legs.
This recent downtrend doesn’t look like it’s disappearing soon – such has been the speed of the price falls.
Maybe sell out now and get back in at a lower price?
Hmmm that does make sense…
Mind you, the savvy and professional investors out there are rubbing their hands with glee at the moment.
With the recent price falls, even the best companies have not been spared.
This means that what was previously a good but expensive share to invest in, suddenly becomes more attractive.
So it would make sense to accumulate more and more.
After all, you make money when you buy right?
If everything’s on sale – might be time to go shopping!
Far as I can tell, those are the options in front of me, how does anyone make a decision?
I think in a situation like this it’s a case of understanding:
What’s your time horizon?
That is to say, what is my time horizon in terms of investing?
The beauty of the financial markets is that everyone has an opinion on what an asset is worth, and how long it’ll take to get there.
That’s why depending on what your time horizon is, you are categorized as a buy-and-hold (usually in a trade for more long term, i.e. years if not decades) all the way to a day trader (usually short-term, measured in days, sometimes hours/minutes, even seconds!)
Personally I went into this trade for a couple of weeks at most, on the belief of a short-term rally.
That hasn’t changed – except my pants are well and truly around my ankles now!
Do you need the money?
A general rule of thumb is to never invest money which you require for your basic necessities, such as living, food, rent etc.
To paraphrase Mr Buffet, “it’s insane to risk what you have for something you don’t need”.
Unfortunately I was ill-disciplined on this occasion and did risk what I had for what I don’t need – after all, I can afford the holiday expenses myself without trying to “gamble” it in the markets.
Although in saying so, I was prudent enough to not tilt everything in – then I’d really be between a rock and a hard place.
How’s the forecast look?
That is, are you confident in the underlying ability of your investment to turn around.
To this end, I am fairly confident that eventually it will come good – the fundamentals hasn’t changed, only the share price.
The reason for the recent drop seems to be solely due to the fact it’s caught up in the broader sell-off.
But I’ll monitor it like a hawk to see if there’s any other underlying reason.
I must say I was reluctant to write this post because no one likes discussing their mistakes right!
But just goes to show you that yours truly is susceptible to emotional decisions just like anyone else.
Although knowing better, I forgot the basic principle that markets can and do drop as much (often more) as they rise – what a schoolboy error!
I’m reminded again of the need to be humble and cautious when it comes to investing.
And as for the reason of being involved to try and squeeze a couple of bucks out of it – WHAT A SILLY BILLY.
Ah well, for the moment, it’s very much a wait and see approach.
It’s what makes investing so bloody difficult, but oh so fun to be a part of right?
Actually… a part of me does hope the prices drop further – cos I’ll jump STRAIGHT back in and pick out some more diamonds in the rough haha!
But not today… today we’ve got a wedding to attend to… whenever MrsFrugalSamurai is ready.
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