There was a big drawdown in my portfolio last month. The analytical part of my brain tells me it's fine and keep calm, but all indicators suggest that my stress level is shooting up: My shoulder muscle stiffens. Small things start to irritate me. Worst of all, I cannot help yelling at kids, the last thing I want to do in my life!
To help myself cope with stress, I devise a different way of thinking market movement.
Most investors would probably love it if time travel were possible. If we think the market movement not in terms of price but time, price fluctuation is exactly equivalent to time travel.
For example, the market bottom in March, 2009 just offers us a rare chance back to 1996. As long as we don't believe the world will be stuck in 1996 forever, we should probably buy some stocks before we're back to future again.
People often talk about 1987 Black Monday, the largest single daily loss, as a 6-sigma event. But, if we think it in terms of time travel, we're just visiting a year ago briefly. It just sent the market back to the beginning of 1987. The market ended at almost identical level at the end of 1987, which is a tremulous in term of price movement but a boring and uneventful year in the eyes of time traveller.
Most of market drops or rises just move our fortunes back and forth a few months or years. Another way to comprehend (cope with) the changes of fortune is to think, we're just as poor/rich as a few months and years ago. We probably haven't changed our lifestyle during the same periods. So, why bother to worry that much?
If we always make long term investment decisions (>10~30 yrs), our decisions to long the market a month ago should still be valid when market fluctuation move us back a few months. If the decision is truly long term and correct, we should buy more rather than feel stressed out when the market is dropping.
Anyway, the new thinking gives me a different perspective of market movement and sometime remind me of rare chances to seize lost opportunities or correct past mistakes.
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