Panic selling once can destroy years of good investment decisions in an instant
but keeping your head on straight when your portfolio is tanking is hard
Here are 13 investing tips/tricks/principles that I use to keep calm when my portfolio is in free fall:
1/ Know what you own and why you own it
You can borrow stock ideas from other investors, but you can’t borrow conviction
You must understand the bull AND bear case upfront, otherwise you won’t have the conviction to hold when the price is going down
Research builds conviction
Conviction enables patience
Patience builds wealth
If a 20% drop shakes your confidence in a business, you didn’t do enough research
2/ Know what drives long-term stock returns
In the short-term, emotions & computer algorithms determine stock prices
In the long-term, profit growth determine stock prices
This is a core investing principle that you must fully embrace
Look at these long-term charts of $MSFT, $HD, and $AAPL
Net income growth & stock price growth are closely linked in the long-term
That’s not a coincidence — profit growth IS WHAT DRIVES long-term value creation
