Why your portfolio probably sucks, and how to stop trying to get ahead.

Strap in for a much-needed dose of realism. Building a solid investment portfolio is no easy task, and there’s no simple recipe for success. But there are several recipes for disaster, and this is exactly what I would like to cover in this article. Out of all the people reading this, I wish one of them is future me.

The trouble is, you think you have time.

Unlike day trading, building a portfolio is a long process that can take years of learning, trial, and error. Because you’re working with a longer timeframe, a bad long-term strategy is usually worse than a few bad trades. In this era of instant gratification, we often forget that patience and persistence are key virtues when navigating the tumultuous waters of the global economy.

A stoic, mindful approach to your portfolio

Stoicism is a philosophy that emphasizes the importance of rational thought, self-control, and inner peace. In a world where global politics seem to be in a perpetual state of chaos, Stoicism can provide much-needed grounding and guidance. Stoicism helps put your ego into perspective and accept that you’re not the center of the universe.

1. Control What You Can, Accept What You Can’t: When building a portfolio, it’s essential to distinguish between what you can control (your strategy, research, and emotional reactions) and what you can’t (market fluctuations, geopolitical events, and the whims of world leaders). Accept the inherent uncertainties of investing and focus on making informed decisions. If you caught yourself making the wrong call, maybe you should consider rebalancing your portfolio rather than chasing your losses?
2. Practice Detachment: “Take each particular thing for that it is in itself” — this one comes from my favourite stoic, Marcus Aurelius. When analyzing investment opportunities, approach them with a clear mind, free from biases or preconceived notions. Meditating is proven to help you detach yourself from your thoughts and emotions, in a good way, but most importantly it calms your mind. This will enable you to make better-informed decisions and avoid falling prey to the ever-present traps of greed and fear.
3. You can’t lie to yourself so stop trying: Just because you own an asset, doesn’t mean it has to do well. In fact, certain crypto subreddits often joke that an asset will keep going up unless you buy it. That is (probably) untrue, but simply holding onto an asset thinking that it must go up is foolish, if all you’re basing your decision on is hope. Excluding shitcoins (which are bad investments in general), what’s the reason for holding what you’re holding?

(Technical) analysis for your Mind

Investment decisions are often influenced by our instincts, emotions, and deeply ingrained psychological biases. To truly understand the impact of these factors. Here are some of your personality traits that probably contribute to less than ideal financial decisions:

1. Loss Aversion: People tend to be more sensitive to potential losses than to potential gains. This leads to an overemphasis on avoiding losses in our investment decisions, which can result in missed opportunities or holding onto underperforming assets for too long. The latter is what really kills a good portfolio. Holding on to dying assets fueled by an almost faith based system is likely to result in long term loss.
2. Herd Mentality: Following the herd can lead to buying high and selling low, or getting caught up in speculative bubbles that inevitably burst. LUNA, Celsius and Voyager losses could have been avoided had more of us done more thorough analysis of their books and MO, but we were all told they’re “safe”.
3. Overconfidence Bias: This is the polar opposite of herd mentality trading. Many investors overestimate their ability to predict market movements, often relying on gut feelings or anecdotal evidence. Overconfidence can lead to excessive risk-taking and a failure to diversify one’s portfolio adequately. Interestingly enough, overconfidence comes from a similar place faith-based belief comes from. The idea that you just know better, because you’ve been getting high on your supply of hopium.

So, How Can You Stop Trying to Get Ahead?

There’s no right answer, but when I do catch myself being a bit too chaotic in my approach, I like to remind myself that I should:

1. Embrace Diversification: Spread your investments across various asset classes, industries, and geographical regions to mitigate risk and protect your portfolio from the unpredictable nature of global events. Knowing how and where to diversify is a whole other beast.
2. Practice Emotional Discipline: Learn to recognize and manage your emotions and biases, and avoid making investment decisions based on fear, greed, or overconfidence. Develop a rational, well-reasoned investment plan, and stick to it even when your instincts or the crowd tell you otherwise.
3. Stay Informed and Engaged: Keep yourself updated on global political and economic developments, and understand how they might impact your investments. Be prepared to adjust your strategy as needed, but always do so with a clear, rational perspective.
4. Embrace Humility: Recognize that you can’t predict the future or control every aspect of your investment journey. Be open to learning from your mistakes, and seek the counsel of others with more experience or expertise when necessary.
5. Seek Balance: Remember that investing is just one aspect of your life, and it shouldn’t consume your entire existence. Cultivate a well-rounded life that includes meaningful relationships, personal growth, and self-care. This holistic approach will not only make you a better investor, but it will also contribute to your overall happiness and well-being.

By cultivating emotional discipline, embracing diversification, and trusting the process, you can build a resilient portfolio and, perhaps more importantly, a richer, more fulfilling life.

Thank you for reading, and I wish you a happy life. Please remember to clap and follow me for more.