I know a lot of people who are rich, not wealthy.
You see them all the time on TV. The media moguls, the people you look up to, see in crypto $7m Super Bowl ads, and most obvious, those all around you indebted to impress strangers.
Your income to expense ratio reveals your true balance sheet.
Sadly the average credit score is nowhere near 850, the national debt to income ratio is poor, national savings rates have tanked to less than 20% and passive income sources over 5 seem unrealistic to many people. Yet panic selling, retail trading, and touting crypto seem more rational to many.
Everything about money is emotional.
No wonder passive investors historically beat out active investors. 80% of day traders lose 40% or more of their capital since they equate emotions to decisions and donât know how to simply let go.Â
Letting go can seem impossible since weâve been programmed to believe, the more time and effort we spend on something, the better results there will be. Within our portfolio, we want to spend the most attention to it for higher returns, disregarding the fact that past results do not guarantee future returns.Â
This sense of urgency and control is certainly advisable in many aspects in life, but the markets are less predictable than anything with millions of market movers, indicators, factors, and unpredictability. Thankfully they donât only move based on expertise, rather anticipation, as a forward looking indicator, trading in future time.Â
The present is already gone in the markets, hence the name, futures. Staying on the course you set your portfolio on will save you time, headache, fees, and misery than rebalancing, hypothesizing, and technically analyzing all day long.Â
Similar to picking a scab or wound, if you continue to touch it, it will never heal!
If you didnât let go of your expensive speculative tech holdings or virtually any company in the S&P500 in the last week when markets made a rapid turnaround, you missed out on a deep discount. High-flying tech, meme, crypto, and at-home stocks are at remarkably low prices, down 50â80% in the past six months.Â
Itâs a dangerous move to panic sell and buy on margin, especially within the markets where thereâs already added pressure from geopolitical tensions, the Fedâs tightening cycle, hyperinflation, tight labor market, supply chain disruptions, and systematic and unsystematic risk shaking the markets.
Whatâs certain is uncertainty yet people still gamble against themselves and arbitrage their moves in hopes of making a slim payout in the end.
As a society, weâve become too audacious in ourselves. We need to level the playing field again and tame our ego. In order to do this responsibility and have it last, it starts with prioritizing our needs in life and stop comparing ourselves.
Comparison is truly the theft of joy not only because the grass will forever look greener on the other side but because brands, platforms, and the Zuckerverse makes it too easy to buy things we donât need to impress people we donât like with money we donât have.
Emotional regulation and EQ are crucial skills that unfortunately are another bundle of prerequisites that are avoided in the institutionalized education system. Alongside financial, digital literacy, and mental health, these tools set up the framework for how to manage wealth and responsibly invest. Since the quality of our mind is our life and what we take out of an experience defines the experience more than the experience itself, the same thing goes with investing.
With a lack of emotional regulation, everything will go downhill since equity investors in particular have a hard time letting go. How do you expect to earn anything if you cannot tame your emotions or let it work for you? Platforms have made it too easy these days with a click of a shiny button, fractional shares, and a few dollars and start plowing into meme stocks, crypto, high-flying tech, and unprofitable stocks for no reason other than entertainment, hype, social movement, and amusement.
Money Mindfulness
When we feel angry, that is the time we should retreat, not get involved nor speak to anyone, unless it is in therapy, and prioritize emotional management. Nothing good comes out of anger investing or arguing. Be diplomatic instead. Everyone will listen to you then.
If you look around in your office or just the people youâve worked with the longest, youâll notice some clear commonalities that donât pop up right away when you first encounter them since they may not be as the typical charismatic outgoing person you imagine, but day to day soon enough, they light up your world because of small irreplaceable characteristics.
They are EQ queens and kings. They not only value listening to others and make you feel like the most important person in the world, but they also have enough courage to not be bothered by emotions, block out bullies, hype, speculation, gossip, and focus their attention on what matters:people. In a conversation, they donât want to talk about themselves since they already know themselves. Most people cannot drop this conversation and hence, are naturally harder to get along with. EQ masters are charismatic and humble in this way because they are invested in others and in the long run, it comes back to you since the best gift is giving.
When you are able to block your emotions from decisions, especially within investing since rarely is scalping, wash, arbitrage trading, or dumping stocks going to get you to a better place, you start to feel more powerful and confident within your decisions.
Mind over matter in everything. When you feel rallied up or in a contentious state, remember words cannot be replaced. If you feel thereâs an urgency, especially with your money, it looks too good to be true or not worth it in the end, back out. Fear of the unknown is the worst kind of fear. The markets screen for predictability and when they donât have it, USD, gold, silver, precious metals, and treasuries are a safe haven. Leading up to the invasion, the markets went into a free-for-fall. Once the invasion was actually declared, the S&P 500 was up 1.5% due to certainty, and oil price futures slipped.
Your sanity is key but not paid attention to enough. As Bezos pronounces, follow your guts for sure but donât overblow it to the point where youâre ruining your spending habits, investment decisions, and pushing everything down the drain.
The past cannot be reversed. Think two steps for extra protection. Diversification is the best way to sleep soundly at night. International equities work in lockstep with the U.S. market during times of fear but retreat and forge their own path when things cool down.
Save yourself with emotional regulation. If you are uneasy about your reply or actions, better wait than send and forever regret. There should never be any immediate pressure to spend at the store or on the app, otherwise, you are already in a trap.
Nothing ever feels as great as the build-up to the moment. Whatâs the best part of vacation? Planning and packing for it! Think ahead to not blindside yourself.