Memoirs from a sell-off...

All too familiar headlines are populating our screens. Crypto is selling off, stocks are in the red. Hysteria fills the echo chamber that is the twitter timeline... and it all feels fairly doom and gloom. Here are some bullets that I've accumulated over the past few years that are helpful to process & reflect upon, on a down day in the market.

1) Trading & investing should be emotional in parts

One of the most bandied around phrases on fintwit and other forums is that trading shouldn’t be emotional. While I agree that taking positions on the companies you happen to love, without doing sufficient due diligence isn’t the wisest move, we should not overlook that the link between trading, investing and emotions is inherent.

Money is the fabric of most ambitions and goals, in some way shape or form. Money can be a means to achieving your next steps (renting a better apartment, buying a car). If you punt £20k of savings into a high beta asset with the intention of using it for a deposit later down the line, and that asset tanks, you have partially lost the opportunity to pursue that future ambition.

If you can segment your income and have capital (money/savings) you are willing to lose, then you'll fare better and be able to compartmentalise that 'disposable/yolo' element of your investments, from those you're using to generate wealth with.

2) Nothing in the market is a certainty

Many retail investors joined the market mid 2020, with central bank stimulus euphoria in the US giving rise to investor stars such as David Portnoy. For many of the new market participants, the only certainty was that the market seems to go up, so having money in the markets made a lot of sense, particularly when there was literally nothing else to do with their time over lockdown. Arguably, when you look at the key indices over time (S&P 500, FTSE100) the point stands that over time, the markets have historically trended up.

However, the narrative and macro backdrop that was overarching in 1995, won't stand in 2009, and likely won't stand with the same credence in 2021- as an investor, or a trader you should be looking at your portfolio with a balanced mindset. Understanding the concentrations in your portfolio (what % of your money is assigned to different holdings) and the themes you are exposed to- will help manage your strategy in a downturn.

3) Don’t buy it simply because someone online is shilling it

If losing on a trade that someone pressured you into putting on is painful, imagine putting on a trade because your favourite 2009 one-hit-wonder rapstar is shilling it on Twitter and THEN losing out. So many of these rogue endorsement are meme material (we often joke about being at the top of the market when Soulja Boy is telling his followers to go perma-long Doge) but behind the sarcastic undertones is an army of consumers and retail level investors who are actively marketed to by an influencer economy. The companies paying celebs to shill crypto online are smart. Be smarter and try and understand that you have much more to lose than a celebrity who's supplementing their cancelled tour with alt-coin ponzi schemes.

4) Doing your own research helps you to understand products you’ll be investing in

Many people ask where to even start when it comes to investing/trading. Moneysavingexpert is an excellent resource packed with explainers for asset classes, how to start investing, best deals for credit cards etc. When I started investing, I looked at the different stocks and funds I was interested in over a period of time and kept an eye on the price action and sensitivities - until I felt comfortable enough to invest in them. Talking to the people around you will help too, but be wary about being stuck in an echo chamber, this is something that you'll be instantly sucked into on twitter and something you'll see on online forums too.

Having a plan, thinking about investable future themes and marrying up the two is much more satisfying than buying a penny stock because reddit told you so.

Good luck out there.