Investing is a much more intelligent pursuit than gambling, but it’s also a second cousin to the latter. Neither endeavors will solve all of life’s problems. Therefore it becomes important to learn about ourselves and the needs we are satisfying.
Investing (and on a similar note trading) has become somewhat of a “hobby” for many 20 to 30-somethings during this past year. What, with the extended time at home and additional expendable income for some, as well as pandemic-fueled-uncertainty, it was very easy to start looking at retail investing as a generally positive outlet, that would double as a way to work towards becoming future-proof. On top of that, it’s easy to fall further down the rabbit hole because unlike gaming, gambling, and drugs, even if investing becomes all you talk about, most people around you would treat it as a valuable trait: “Oh wow, It’s impressive that you are so committed to your future.” It’s easy to overlook obsessive behavior because of our tendency to associate the idea of investing with greatness, success, and wealth.
To add fuel to the investment fire (possible addiction) within us, we now have apps and the internet which allow us to stay 24-7 informed about what’s happening in the markets, so that we don’t miss the next “opportunity.” (Sometimes I wonder if our grandparents had a newspaper addiction.) Technology can stop us from being present and become a source of escape from the real world issues; the recent gamification of trading and investing can further serve to turn these activities into an escape, albeit with better optics than getting drugs or buying out the mall.
Still there are some signs that can help us identify if our investment behavior is edifying or is becoming an unhealthy habit.
- The Investment Casino
- The Emotional High
- The Non-Stop Investment
- The 24-7 Portfolio Awareness
- The Secret Portfolio
- The Non-Supportive Loved Ones
Treating Investing Like a Casino
Investors and traders are strategic. Even the ETFs you might be looking into have a prospectus, where they explain the objectives, risks, charges, expenses and other important strategy-related information relevant to the fund. The goal is the same for everyone, racking up the bills; however the minute you divert from the numbers and the strategy, it is easy to make it about the emotion and perceived opportunity. This initiates the path towards addictive behavior, where a loss is made up for by “putting more money on the table”.
Solution: Create a strategy. Decide for how long you will implement it before implementing new ideas. Execute it.
You Need the Emotional High
If you are delighted and have an emotional attachment to seeing the numbers of your portfolio going up, this might be a sign of alarm. As humans we need a natural adrenaline rush when we win, and this can be extended to winning on a trade or seeing our portfolio jump up 5% in a day. However when we get attached to this daily behavior and lose sight of the long term macro, we open the door to addictive behavior. It has happened to me, checking Robinhood more than 20 times on a Sunday, when you can’t even make a purchase. Then being excited when I got into crypto because I could now trade during all hours including weekends.
Solution: Create a schedule for your trading as well portfolio management and stick to it. Reduce how much you check your portfolio to once a week or once a month.
You Are Constantly “Investing“
Investing is a strategic pursuit as many hobbies, specially because you have to expend resources in order to engage. The same way you can’t fish every day, or workout every hour, trading and investing has a rhythm that you can follow in order to still maintain a touch with reality and not spread yourself — or most importantly your funds — thin. I understand that in some instances it seems like a once in lifetime opportunity to jump in on a stock at a particular price point, or to set up a particular options trade; my take would be that there can’t be “opportunity” around the corner every week, it just doesn’t work like that. Taking advantage of an opportunity is an active decision and it requires that you understand and can absorb the risk involved.
Solution: Same as above but include sticking to a budget. Also give yourself ample time to research before putting money on the table.
You Feel the Need to Be Informed 24-7
Same as any other hobby. If you can’t tear yourself away from it for a couple of minutes, there might an issue rising. If you are constantly juggling Yahoo Finance, Bloomberg, Robinhood, and your Google Sheets spreadsheet, you might need to take a breather and reevaluate what are your goals. Maybe even take on a different hobby for a bit. I have found that the best approach is to “fire and forget.” By ignoring the noise produced by the news and the gamified apps that are built to pull you in and keep you engaged, you are better able to let the market do it’s thing while you continue with your initial strategy.
Solution: Delete the app for a bit. Get another interest or hobby and check your stocks or trades on a schedule. If you are afraid of losing, taking a risk or wasting an opportunity, learn how to use Limit Orders, Trailing Stop Orders, and recurring investments or any other tools and strategies that can automate your strategy.
You Keep Your Trading a Secret
When I was in college I went through a period of time where I couldn’t wait for everyone to go to sleep so I could play video games to my heart’s content without dealing with the scrutiny of my girlfriend or interrupting texts and calls from friends. This way I wouldn’t have to deal with the external accountability of how I was distributing my time. Eventually I had to actively manage the time I spent gaming because it was affecting my other commitments: studies, friendships, faith and love life. If you find yourself hiding your trading activity, using cards or bank accounts unknown to your significant other, lying about how you are spending your time, or not being able to talk about the activity you spend a majority of your time engaged in, this might signal trouble.
Solution: Find an accountability partner who is also into trading and being financially responsible; talk to an advisor, financial therapist or an expert regularly if you have access to one; talk to your family and loved ones about your goals, strategies and results. These close relationships care about you enough to point out possible common sense weaknesses that you might miss because of the excitement or perceived opportunity. Any of the professionals mentioned will be able to offer sound advice based on tried and true methods and fact-based approach that will get you on track and allow you to handle the financial and emotional reality of this hobby
The People You Care About Don’t Support Your “Investments”
If the people you care about are not supportive or you are ruining real world relationships through your financial pursuits, this might be a red flag. If you look up from your screen and realize you are alone in this, you might need to re-evaluate your actions. Most times your loved ones can sense when something is not quite right, because of your demeanor, behavior or approach. They might not be supporting your endeavor because they are seeing that the real world consequences or changes you are experiencing far outweigh the earning potential you have presented to them.
Solution: Have an earnest conversation about why they don’t support your pursuit and figure out if it’s based on fact or just opinion. If they have facts to back it up, consider seeing an expert. If their opinions differ suggest to learn together. Teaching someone else can be a tool to solidify your own strategic approach.
Conclusion
There are many things out of our control in the world and these things influence the markets we engage with in trading and investing. You are already using your knowledge to strategically earn and invest in tomorrow. The best approach is to answer these concerns early on. Consider that when investing and/or trading there is risk involved. When a down turn finally happens or you lose in a trade; you want to be emotionally, mentally, and financially prepared to ride the lower part of that wave, rather than panic and fall off the board, or worse.
The Financial Therapy Association takes a holistic approach to thinking, feeling, and communicating about money. The benefit is that through your pursuits you are already on your path to securing a better future for you and yours. Talking to professionals can provide the necessary tools to ride the possible future challenges you might face while growing within this fruitful hobby.
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