What is Your Investing Mindset

For the average investor you can’t, and shouldn’t, think like a day trader. I am a youngish guy. I have a lot of time before I retire so my investing outlook is extremely long term. I put the majority of my funds into my 401k and my wifes Roth IRA as long term investments for our future. i am not a day trader, or really an investor by any means. I have only recently opened my first non-tax advantaged investment account. Even this one account is still a long term investment in my mind, I am not trying to turn a quick buck it is still a relatively long term investment for me.

What gets me is these huge swings in the market. Don’t get me wrong, they are real bad but how do they really affect your outlook. I had a conversation with a relative the other day about that crazy drop in the market that seemed to scare the pants off of everyone. He and I looked at it the same way. 1.) it was a fluke and 2.) we both missed out on an opportunity to make some quick money. While that was an exception this recent recession fits the same play for me.

Like I said I am still youngish so at this point it is actually beneficial for me to have the markets hitting new lows. Last time I checked it is better to buy things when they are cheaper an sell them when they are higher. Right? Sure you may have bought some of it back when prices were high but now they aren’t and you are still buying. At the height of the markets we saw the DOW reach 14,000+ which then dropped to 6,600ish. We all bled a lot during those months but for those of us who didn’t give up we were buying into a market valued at half of what it was. My confidence in the US economy is pretty high so to me this kind of situation is an unfortunate occurrence the presents unprecedented opportunity.

I know there is probably some people out there who disagree with my though process. They are probably much closer to retirement and lost a ton of money. That is why general wisdom is that the older you get the safer you make your investments. Moving more and more away from stocks and more and more into bonds. The idea here is to keep your money safe as it gets closer to time to need it. I won’t say I buy 100% into it but it makes good sense right. You don’t just want that money to be there when you retire, you need it to be there. The people whose retirements were hurt the most by the recession were those people closest to retirement who were riding the high of the market and not thinking of the possibilities. The biggest thing to remember about investing, saving, living, working, and any decision you make is to remember.. it depends. Everyone’s situation is different so don’t buy into the hype, or think because my neighbor is doing it it must be right. You need to do what is right for and comfortable for you.

{ 7 comments… read them below or add one }

1 bern May 21, 2010 at 12:50 am

Do what the wealthy and the banks do. They keep money flowing and not stagnant. They maximize their dollars and have all strategies firing in the same direction.
.-= bern´s last blog ..Choose Financial Freedom SiteSearch. =-.

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2 Jimmy May 23, 2010 at 11:44 pm

Great write-up. I am also relatively young, aggressive, and don’t care too much about the volatile markets we see now. I expect the general trend (long-term) will still be upwards, and dollar-cost averaging will help us to mitigate some of that risk and take advantage of low costs. Thanks for the blog.

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3 Kylie May 24, 2010 at 8:39 pm

I am still young so think very similar to you. I plan on investing in the stock market as it is very cheap and I am viewing it as a long term investment.

I am in Australia and our housing market has not had the same problems as the USA, as our mortgage lending and things are structured very differently to yours, but who knows what the furture holds.

So one of my investment strategies is IP’s. Our Gov gives heavy tax incentives to invest. We don’t get any tax benefits from owning our own homes (which I am led to believe the US does, which is great) but we get massive breaks from having IP’s and since rental vacancies are less than 1% and you have people lining up the block to get a rental, it is a pretty good thing here atm. I have one and spoke to my mother in law about needing new tenants (this was early last year). Went out shopping, came home adn she had 4 families ready to move in. I didn’t even have to advertise and the ones I got have been brilliant.

I totally agree with you too that the older you get the safer you play things. Loving your blog btw. Sorry for the epic comment! lol.
.-= Kylie´s last blog ..Unexpected bonus with my car =-.

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4 Darwin's Money May 25, 2010 at 10:31 pm

I actually have a dual personality. I’m a trader in my taxable investing account and I don’t touch my long-horizon retirement accounts (401k and IRA). Example – during the crash in 2008-2009, I made some trades like shorting financials, using puts, etc. to generate cash and then I bought 100 shares of Apple at 89. It’s now over 250. Meantime, I didn’t touch my retirement accounts. I have many co-workers who said “they’re fed up” and got out of stocks completely – at the pivot bottom! And they’ve missed the 70% runup since then. Sitting in cash in a retirement account makes no sense, but that’s what happens when people think they can outsmart the market in a retirement account.

I agree trading isn’t for most people. Over the years, I’ve learned a ton and I continue to learn from my mistakes, but I never violate the rule and deviate from my long term strategy in my retirement accounts which are much larger.

my 2 cents.

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5 Len Penzo May 28, 2010 at 8:33 pm

I’m one of those guys who shifts the money in my 401(k) in and out of the stock market on an occasional basis. I’m not saying it is for everyone, Kyle, but if you are paying close attention to the macro economy you can make some very educated guesses.

I did this at the beginning of 2008 and pulled all my 401(k) money out of stocks. The market crashed nine months later and I jumped partially back in at the start of 2009 and then gradually began increasing my allocations back to stocks.

At the end of April I pulled everything out of stocks again. Am I being foolish? Maybe. But it’s not like I am making these decisions in a vacuum. I study and research and draw my own conclusions.

There is no rule that says the stock market will always go up over the long run. The Nikkei peaked at 38,000 or so in 1989. It’s now over twenty years later and sitting at 9700!

Best,

Len
Len Penzo dot Com
.-= Len Penzo´s last blog ..19 Things Your Suburban Millionaire Neighbor Won’t Tell You =-.

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6 Austin June 1, 2010 at 9:08 am

Ever since I saw a picture of a huge fall in the market within a larger picture of the market over 100 years, I haven’t been worried about the ups and downs. Those peaks and values are insignificant if you’re in it for the long haul and that calms a lot of fears.

I watch the market every day, but I’m more interested in the process and seeing how people react to it. It’s my American Idol.

Austin @ Foreigner’s Finances
.-= Austin´s last blog ..How to Negotiate Overdraft Fees =-.

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7 Richard @ Debt Assistance Guru July 19, 2010 at 1:17 pm

Personally I don’t like the idea of investing in shares for a huge number of reasons. I don’t like the obsession with floated companies on short term profits to keep their share holders happy. I don’t like the way many of them treat their employees to make those profits. I also feel share investing is really quite a big gamble and never cease to be amazed when amateur investors are shocked when they lose a lot of money.

So for me, I have invested in my own businesses. Things are going well and any “excess” either goes into expanding an existing business or setting up a new one. For me I feel far safer and more confortable investing in this way, find it a lot more fun and have already built up and sold one of them for a return that I am very happy with.

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