My portfolio continued to slide lower to $129,705. Mainly due to concentration of stocks.
I now own less than 8 stocks, and some of them have big pull backs.
In my opinion, pull backs are the chance to buy more low-priced stocks in a great companys.
I thought this is a very reasonable thing to say, and to understand. However, I was proven wrong yet again.
My parent's retirement account, which I help manage has suffered some correction in January, and when my mother asks me if she should sell the losing stocks.
Can you guess what my reaction is?
"Hell no!" are you crazy? I shouted
"If anything, you should actually buy more stocks now."
My father, who was listening to our conversation gave me a stare.
"The stock market is falling, and you ask us to buy more?"
His attitude is so condescending, it is no different than a father who wants to tell his gambler son not to gamble anymore and find a job.
My mother soon agrees with my father, and fill the room with fear...
"If the market isn't doing well, we shouldn't buy more she said..."
I wanted to say: "hey, this is a great opportunity! you don't want to miss it!"
Words just didn't come out. I slammed the brake.
Perhaps because I know it will go into deaf ears.
They're afraid that the market will continue to go down. "What if it continues to drop?" I can almost see their thought bubble...
And then I realized, their fear, and their reaction is exactly why the stock market can generate wealth for people like us who actually understands the market.
My parents, they don't understand the stock market and they don't really want to. Yet, they're participating in stock trading.
They have little to no understanding of the economic cycle, but they decided they should follow their own instinct when investing.
The biggest and most disappointing thing is, there is no way for me to convince them otherwise.
Like most investor, they don't want to be told what to do.
And that's ok if they are willing to learn and find out what they put their money into.
It's sad to actually realize this, but when you can't even convince your loved ones...
"When others are fearful, I am greedy. When others are greedy, I am fearful." This Buffett quote strikes again.
"When others are fearful, I am more fearful", which should be the more accurate state of mind when applied to most people.
Herd mentality have help us survived for thousands of years, and its deeply ingrained in us.
It takes training and a strong mind to actually fight and win against such a strong instinctive reaction to danger.
When the stock market is falling, and most people and cutting loss and hold on to what they have.
Who have the mental ability to hold on to what they believe, and continue to buy more stocks?
Very very few, that's why only 10% of the investor actually makes money in the stock market.
The saddest thing is, Value Investing, Buffett's way of investing, is not gaining any traction.
Perhaps it is too counter-intuitive, and against the very nature of who we are, and what nature made us to be.