Monday, December 21, 2009

Irrational Need for the Latest Investment to Perform Well

Nearly a month ago I made an RRSP contribution and used the money to buy an index ETF. I then watched how it performed 10 minutes later, an hour later, a day later, etc. Even now I find myself more interested in how this ETF is performing than the rest of my portfolio. This happens every time I make a new investment or add to an existing one.

Of course, this is all irrational, but I just couldn’t help being pleased that the ETF stayed above my purchase price during the first day. It shouldn’t make a difference to me whether I make $100 on this investment or some other one, but it does. I do my best to keep irrational emotions like this from affecting my decisions, but that doesn’t stop me from having the emotions.

I assume I’m not alone in this need for new investments to perform well. Do other investors find themselves caring more about recent purchases than the rest of their portfolios?

4 comments:

  1. "Do other investors find themselves caring more about recent purchases than the rest of their portfolios?"

    I don't believe it's so much related to the fact that it's a 'new' investment. I believe most investors want to be 'ahead' with each investment. They already know where they stand on others, so the 'new' one attracts their attention.


    "It shouldn’t make a difference to me whether I make $100 on this investment or some other one, but it does"

    I agree completely: It does not matter where the profits originate.

    I see too many investors desperately trying to reach 'break even on a losing trade - doing anything to avoid taking a realized loss.

    They could make more money, more quickly in a different position, but they are stuck with the loser - attempting to make it a winner.

    I believe it's the same. "New" investments are observed closely to root them into the 'winners' column.

    Regards,
    Mark

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  2. Mark: So, all of my other investments are already either winners or losers, and I'm hoping to cheer the latest one into the winners column. Interesting.

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  3. It's like when you have a new child, it's much more interesting than your other child, so you spend all your time with the new one.

    The difference with your investments is, in a few years, your other investments won't complain about "How you like the ETF more than us!!!"

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  4. nice post. thanks.

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