Home > equities > sitting out, staying put and clarity of thought

sitting out, staying put and clarity of thought

I have been meaning to write this post for the last few days… and have finally found the time.

At the beginning of stock market decline in Aug, I was about 7% stocks, 8% bonds and 85% cash… today I’m about 17% stocks, 8% bonds & 75% cash…

A lot of the blogs/comments I have read over the past two years and particularly during the stock market decline in Aug/Sep made me really realize the virtue and reward of staying out and staying put…

Knowing when to sit out and watch the market from the side lines is just as important as finding good trade setups and investment ideas… if you don’t find any, be patient, read/study, analyze and pound when the time is right… I have this much from many bloggers particularly the folks on Stocktwits.

Sitting out has tremendous benefits:

  • I didn’t not feel the need to look at my portfolio 3 times a day even after the market dropped 10% and was dropping more… more time to do things I want to do
  • I was able to consume and more importantly comprehend whatever I read, be it MSM or the very informative, educational and mostly unbiased financial/econo-blogosphere – it is natural to comprehend less when you are worried.
  • I had all the time in the world to read about topics I was interested in rather than looking for topics/posts that would make me feel better and confirm my supposed rationale for holding stocks
  • I could analyze a trade or an investment idea with fewer inherent biases

Sitting out is one of the hardest things to do possibly because of the fear of missing out… overcome the fear of missing out and you will have a clearer mind to analyze more opportunities ahead.

  1. December 19, 2011 at 4:31 AM

    I should’ve been more conservative like you. Cash is King they say. But the anxiety of possibly missing out on a rally for me is more than the uneasiness involved in being fully invested. But I want to try a more balanced approach to investing.

    • December 19, 2011 at 12:42 PM

      It depends on what your goal is… if you are trading or investing… if you are investing, then being almost fully invested is probably the right thing.

      For me, sometimes it is hard to stomach the day to day volatility when fully invested… this year surely Cash was King, at least in the 2nd half… however, on the flip side, I missed the massive rally in the 2nd half of the 2010.

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