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Dealing with Volatility

A blink of an eye and 2 weeks of the new year just whiz by. Much of the gains in 2021 t00, whiz me by, in a matter of weeks.

If it were 10 years ago, under the same circumstances, I would have felt regretful.

Yet, I don't feel much these days.

Not because I'm zen, but because I had seen a bigger drop back in 2008 then this drop felt less painful.

Here are some of my coping mechanisms and investing philosophies.

  1. Never invest with the cash you can't afford to lose.

  2. Have a long-term horizon. Studies after studies have shown that, the longer we hold, the higher our chances of making a profit.

  3. Don't check your brokerage account.

  4. Keep some buffer cash to take advantage of such dips. It feels like a CNY shopping spree 😁

  5. Volatility means it moves both ways. It can drop 10% in these few weeks. It will also rise 10% (or more) in the coming weeks (rarely in weeks, but likely in months or years).

  6. What goes down is faster than what goes up.

  7. Having some skin in the game will always be better than being on the sideline. Even if it means losing some money from time to time.

  8. Every dip is a good learning opportunity about my investing behaviour.

  9. I can choose to "stop loss" now. But how do I know when is a good time to enter before it rebounds? I am too busy for such a strategy. Buy and forget fits me better.

  10. Some stocks/ funds provide dividends. I'm paid while waiting for the prices to recover.

  11. Given that it's a down-market season, a covered call strategy seems plausible. However, be very selective on those companies because you don't want to cap your upside.

  12. Keep myself busy.

  13. Refer to point 3.

  14. Research has shown that 1 in every 3 years is a down market. Potentially, this year could be a down market.

  15. I want to buy when the market is low. If the market keeps going up, how do I buy when it's low? Hence, a down market is what I should be elated about.

  16. Go back to point 4.

Sounds like I'm trying to psycho myself to be upbeat despite the market condition. The fact is, I'm also human. I do feel pain when my portfolio goes down.

Yet, I also know that it's irrational behaviours that will more often than not, cause my portfolio to incur unnecessary damage.

I need to be aware of such behaviours and take steps to circumvent them.

And that is what I'm hoping to achieve.

Plus, I've seen worse.

Do stay calm during these turbulent times! Hope some of the pointers above help!

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