edition-5-personal-finance-investing-newsletter

Edition #5: Shiny Stock Syndrome, Goal Post, Blue Chip, Costco, Outsmarting the Crowd

You’re reading my newsletter about psychology and money. If you missed a week, you can check out the archives here.


Shiny Stock Syndrome

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:

shiny-stock-syndrome-investing-mental-model

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.

Read Shiny Sock Syndrome here.

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.

Image source: the Spruce

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.

If you’re looking to load up on 12,000 sheets of toilet paper or 240 servings of Mac & Cheese, here’s a resource on 6 ways to shop at Costco without a membership.

📚 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.


End Note

If you’re enjoying the newsletter, I’d love it if you shared it with a friend. You can send them here to sign up. I try to make it a bright spot in your inbox each week, and hope you’re enjoying it.

Should you find anything interesting this week, slide into my DMs. I love finding new things to read through my online community. Also, if you have any question (within reason), hit me up on the Ask Me Anything page.

Until next time,
Oz


I’m just a guy on the internet with an opinion, so please just treat my content as entertainment. My content is may contain referral links to products I use or love. My content is for informational purposes only, and you should not construe any such information or other material as legal, tax, investment, financial, or other advice. 

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