Dealing with regret

Mr Zombie   January 19, 2016   4 Comments on Dealing with regret

Regret is a bastard and hind sight is 20/20.

These are the type of things that someone who put their back out at the gym today might say.  That someone is me.

I was feeling good, whacked on another 10kg of plates and went for personal best deadlift.  (A laughable personal best by meat-head standards, but it’s my personal best dammit).  I didn’t even start get the bar off the ground before it felt like the bear from ‘The Revenant‘ was having it’s way with my back.

So now I am sat here typing with a heatable hooty strapped to my back for relief.

After feeling sorry for myself for a few minutes and feebly putting the weight plates back I showered and headed back to work, head awash with thoughts

Why did I try for another set?
Why 10kgs?  That was a hell of a step up from my personal best.
Did I warm up enough?
Did I stretch enough?
Was it my fault, did I do the lift incorrectly?

Things could be different if I hadn’t gone for the last lift.  But they’re not, it’s like this and it’s the way it is.

Still, it’s hard not to feel a pang of regret.  Injury through exercise is a probability, one we can reduce to some extent.  Warm up, train properly, stretch for mobility and lift weights for strength.  Still, bad shit can happen.

Regret of loss
Unfortunately, we can’t control where the markets go.  The markets can remain irrational longer than we can remain solvent, and all that.

Perhaps you are feeling a little blue with the recent market down turn?  A little sad  with your portfolio in the red?  Or a bit morose as your NetWorth has taken a wee tumble.

Thing is, that’s all part of investing in equities.  They are volatile, their capital value is going to fluctuate from day to day and hour to hour.  Mr Market is updating himself continually to reflect the latest information (and to impress the equally volatile Miss Weather).

If you are investing for the long term, then a decrease in the market value today should mean very little.  After all, it’s the long term prospects that you are trying to harness.  Not a quick gain, selling when you and your pet dog have speculated that the market is at a ‘peak’.  

Trust him, he’s clever enough to smoke a pipe

A decrease in the market value of investments for someone investing in diversified tracker funds shouldn’t be a cause for regret.  Hell, it might even mean better returns in the long run if you are still accumulating.

Regret implies that you were intending to do something with that capital in the near future, like sell it.  Perhaps you shouldn’t have been so heavily invested in equities if that was the case.

The truth is out there
The evidence and anecdotes are all around us investors, should we choose to seek them out.  Stocks are volatile, but in the long run the trend is towards capital gain inducing heaven.  Yet it’s still tough to battle our instincts, market value is dropping, we need to sell, to GET OUT.  We have a horrible tendency to extrapolate forwards based on short term trends, which leads to buying high and panic selling.  Investors are far from rational.

Looking at my stocks ISA, it is down over the last year against the price paid.  The first thought can be “I’d have been better off in cash“.  While that might be true at this instant, at this pin-pointed moment in time, it’s very unlikely to be in the case in the long term.  And it would seem even less likely that I could time any kind of re-entry into the market to be profitable.

The markets are going to do what they are going to do, and we shouldn’t feel regret after investing in them.  Regret because on paper we have ‘made a loss’.  We need to rewire out brains, regret only happens if you need sell your investments and crystallise that loss (for a reason other than tax loss harvesting).

As an investor in a diversified fund, you still own a chunk of potential earnings whether or not the fund value goes down.  Hundreds of companies, and thousands of individuals, brimming with potential earnings.  Potential earnings that will come forth as capital growth and dividends.  As long as you sit on it for the long run, the probabilities start to skew in your favour.  Of course nothing is guaranteed.

Must be an emotionless stone
This year has been a bit of a lesson for us new investors.  The first five months of the year treated us to gains month on month.  I even wrote that it felt like an increase in market value had become expected every month.  Before things came rattling back down across the remainder of the year.

Like a good geek, I had done my research and the money slung into the market had a marked extraction date of “40 years plus”, I don’t plan on touching it for a long time to come.  Regret will be more powerful if it follows slinging money at the markets with half an eye on getting it out in the next couple of years, for what ever reason.

I do recognise that as humans we can act on emotion, were aren’t just beetles acting on simple impulses (perhaps some of the clientΓ¨le in a ‘spoons on a Saturday night might be).  But I also recognise that emotion can be destructive in investing.  This is part of the reason I have chosen the passive investing route, investing in large diversified trackers.  It takes so much choice out of my hands, and with it goes a huge slug of emotional baggage that you need to deal with as an active investor.  Individual companies can go under, and with it any investment in them.  It seems a vanishingly small probability that a world wide tracker would end up with nil value, and if it did the zombie apocalypse is truly here.

Like any good Zombie, I am a cautious fellow really.  I have enough funds in liquid cash to last 2 – 3 years should it ever be needed, and I’d look to increase that to 5 years should I ever come to living off my capital.  I use this as a buffer, an buffer that can absorb any negative emotions in the investing world, like regret on a falling market.  With this buffer in place, I’ll carry on investing in equities thank you.  

So…no.  The recent downturn in the market hasn’t led to any regret on my part for investing in it.

But I still regret going for that last sodding lift and putting my back out.

Mr Z

[As ever, DYOR, this isn’t advice]

4 thoughts on “Dealing with regret

  1. ambertreeleaves

    The cash pile that you have available at this moment is just amazing… 2-3 years… not shabby! πŸ˜‰ We are not there yet.

    I look at the markets as you: the loss becomes a loss when you sell. As long as you don't sell, there is no loss. The assumption behind is that in the long run, humans strive for growth and progress in all they do.

    Reply
  2. weenie

    Hope your back injury isn't serious – wishing you a speedy recovery.

    As regards emotion towards what's happening on the stock market front, for the first time since I started investing, I've actually stopped checking on my investments – yes, I was one of those who checked EVERY DAY! Not that I did anything when I checked but by not checking, it's one less thing to think and worry about!

    Reply
  3. Mr Zombie

    It's not a huge cash pile really, just keeping our living expenses low!

    Hopefully yeah, people will keep on striving, to all of our mutual benefit πŸ™‚

    MrZ

    Reply
  4. Mr Zombie

    Thanks Weenie, I've done it before and it's not debilitating but it lasts for ages!

    Good work! I barely check my investments, other than for updating my networth tracker. I do tend to check the markets most days, but that's partly because we have the company share price on our intranet homepage. "ooh a 3% rise, I wonder why…" It's too tempting to check.

    MrZ

    Reply

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