Pain from Investing Process

I have mentioned that investing (or more precisely, DIY investing) is a painful process to me. I shall elaborate on why investing is painful in this post. However, I shall start with what I enjoy about investing.

I do enjoy certain aspect of investing. I enjoy the ideas generation and the merging of ideas in investing. For example, you will encounter the idea of expected value in statistics. Simply put, expect value is the sum of the multiples between the probabilities and its outcomes

Expected value is quite dry to me in terms of statistics until I see it taking place in the field of stocks investment. In stock investment, your expected returns on a stock can then be derived in a similar manner, by taking the sum of subjective probabilities multiplied by the respective outcomes. If one invests using value-investing approach, one is basically buying below stocks at prices below one’s subjective expected value of a stock.

Why is investing painful? One, it is painful because investing, when done correctly, is boring. Or some famous value investors put it as “it’s like watching your paint dry”. I guess I am already quite bored presently. Investing seems to worsen my boredom.

Furthermore, it is no fun that I have to restrain myself constantly from acting or trading too much. Often, it is only after my trades that I can detect if my (numerous) trades turn out to be fine or plain silly.

Probably investing in stocks is painful because I have to endure the uncertainty in stocks. Almost everyone hates uncertainty; else there will be no such thing as risk premium. Enduring uncertainty is painful. I may have to ignore the present volatility in the stock prices. I may have to think about whether the stock at its current price is still offering a sufficient margin of safety for me to hold or for me to have the current large position. Such thinking about uncertainty is perhaps what I am doing around once every week.

Finally investing is painful when one encounters a correction. I will, by instinct, panic in a correction. Overtime, the panic feeling may lessen when I experience more and more corrections. However, panic is not a nice feeling to have. And it clouds my thoughts; especially when my thoughts are trying to get me to act differently from what my emotions require. Acting differently or in a way opposed to your emotions is painful.

Given the pain in investing, my view is that I will continue to invest in DIY manner if I am confident of achieving market beating performance. Else, I should consider buying more unit trusts or ETFs. If my holdings solely consist of unit trust, I can always blame the fund managers, instead of blaming myself, for the poor performance.

Unfortunately (or fortunately), the pain will have to continue since my returns are currently better than the market. Maybe, pain from investing stocks can help to relieve boredom. I don’t know. I don’t know which is more preferable, pain or boredom.