Know Yourself

In our conversations with people, we sometimes would come across a conversation in which someone said that he should have bought stocks when the market was at a certain (low) level or sold when it was at a certain (high) level? Well, why didn't he do it? It must be because he didn't know what to do when the market was at that level.

One of the reasons why I am such a boring investor is because I could never give an opinion whether the stock market would go up or down in the next couple of months in conversations. While I do not know whether the stock market would go up or down, I make up for this deficiency by knowing what I should do whether the stock market is up or down. When you know what you should do under all scenarios, it becomes less important to predict the future or worry about it. Take for example the weather. Do we constantly worry in bed whether the next morning would be sunny or rainy? No. Partly, it's because the weather tomorrow do not have much consequences for us city-dwellers. But partly, it's also because we know what to do whether it's sunny or rainy. When it's raining, just carry an umbrella! By knowing what we should do, we do not need to predict or worry so much. Whether the stock market would go up or down is outside our circle of knowledge and influence, but what we should do whether the stock market is up or down is within our circle of knowledge. Use our circle of knowledge to manage those events that are outside of it.

So, how do we know what we need to do whether the stock market is going up or down? It is to have a plan, which guides you what to do under different market conditions. See my earlier post on Have a Plan for more details.


See related blog posts:

• Have a Plan
• I Don't Know Where The Market Is Heading, But I Should Know Where I Stand
• Confidence Can Only Be Built From Within