The stock market went crazy in 2020 after March’s coronavirus dip—and it’s still high. This makes it especially tempting for investors to jump on the next “hot stock.”
I call this Shiny Stock Syndrome, and…how to deal with it:
Our attention is limited. We can only pay attention to so many stocks at one time. Buying new stocks with little research is closer to gambling than investing.
For me, the sobering “self-check” is to ask myself: “Do I find this new investment so compelling that I’m willing to trade my current investment for it?”
The key takeaway is to be as into your current stocks (or investments, or assets…) as you are new ones.
Evaluating new investments in relation to my current investments, while it sounds obvious, is going right into my list of investor heuristics.
Stop moving the goal post
Many people set out to become millionaires. Some achieve it. Once they reach that goal, you can bet their next goal is $2 million, or $5 million…
What starts out as a trickle of desire turns into a stream.
To reach contentment in life, at some point we have to stop moving the goal post.
This isn’t an excuse to not work hard or give up ambition.
If you’re working on New Year’s Resolutions right now, consider Productive Subtraction:
- Make new friends > deepen existing friendships.
- Make more content on social media > eliminate one social feed from my life
- What do I want? > What do I want to give up?
WTF is a “blue chip” stock?
I hear “blue chip” uttered all the time in the investing world. All this time…I thought it referred to S&P 500 tech companies. I was thinking of a computer chips.
Turns out, the definition is way broader than I expected:
A blue chip is a nationally recognized, well-established, and financially sound company. Blue chips generally sell high-quality, widely accepted products and services. Blue-chip companies are known to weather downturns and operate profitably in the face of adverse economic conditions, which helps to contribute to their long record of stable and reliable growth.Investopedia Article
In poker, blue chips are typically higher than red and white chips, but lower than green or black chips.
Similarly, blue chip stocks refers to relatively stable stocks that conservative investors prefer. For example, Johnson & Johnson, 3M, Chase Bank…you know, stocks that bore millennials.
💸 Money tip of the week: Costco Gift Card Hack
Want to shop that CostCo without paying the membership fee?
You may be able to buy a gift card from Costco, then redeem it at a physical store.
YMMV. It appears the most reliable way is to ask a friend from Costco to buy you Costco shop card. Or, you can always shop at Costco.com online but pay an extra 5% fee.
📚 Book highlight: Outsmarting the Crowd
In line with this week’s post about not chasing shiny objects, here are 2 quotes from the book Outsmarting the Crowd.
Missing an opportunity on the stock market to missing a train: another one is sure to come!
Great reminder to steel ourselves against financial FOMO. And another helpful reminder:
Discipline also means not gambling with money you might need. Fear, which can drive people to make irrational choices, is the investor’s worst enemy.
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Until next time,