Wednesday, March 14, 2007

Why Do People Torture Themselves in the Stockmarket?

Larry asks a simple but important question : Why do people torture themselves in the stockmarket? Here's a few observations, feel free to add more.

  1. Inculcation: We are taught that the market is safe, and it is the best vehicle for Americans to both invest and save for the future--witness the SEP IRA plans, 401(k) plans, 403(b) plans, IRA's.....We have accessible vehicles and they drive right to the market.
  2. Excitement: There are enough high fliers to tantalize one's imagination that quick and easy riches can be made.... eyes glaze over, daydreaming of your Maserati's color preoccupies your time, and you try to figure out if you should pay your mortgage off with your gains or buy an new home.
  3. Perception of Ease: Nothing could be easier than finding stocks! Buy technical analysis books, subscribe to a stock picking service, surf the web for clever sites with trade by trade suggestions. It's like printing money (until the press hangs up and eats your money.)
  4. Status: The stock market is emblematic of wealth and status for many Americans--there's a certain cachet about having money in the market.
  5. Social: There's a social aspect--this blog, other blogs (radio/TV shows), and however we choose to interact with those media. You connect with the message, the personality.
Now, having said all of that, I'll offer this up. I credit J. Altucher at the Street.com for saying this, and it is so very true. A model had just made $500K on a gig and asked what she should do. The answer? Go get another $500K modeling job. You don't need the market!

Your return on assets includes your return for your time. You are a big part of your portfolio. If you have $100K in the bank and no other assets and you make $50K a year ($44K after tax), then you've earned a gross return of 44%. Sure it's an oversimplification, but that's the gist of it. Whatever you save and put in your account would essentially be your net return.

I believe that there is no imperative to always be in stocks all the time or even in stocks at all. Investing in your business, in real estate, buying loans, putting your money in CD's or buying bonds...there are plenty of places to put your money. You can put it in my account if you want!

I really try to keep the J. Altucher's story very close in my psyche.

5 comments:

~Nona said...

Put money in YOUR account??? What's wrong with putting money in MY account?! Huh????

Actually, I'm glad you brought up this point.

I know -- know! -- that I've by-passed money/business opportunities because I was too d***** busy following the daily gyrations of the stock market.

They're so seductive.... Talk about a snake charmer....

Actually, once this downturn is past us (!!), I intend to focus on...EARNING MY LIVING.

(At least, that's what she SAYS she'll do...) (Sigh....)

Leisa said...

We can each agree in our local areas to be part of "stock-junkies anonymous". NOw, we'll need to come up with a 12-step program.

Gemma Star said...

I think the first step is to admit there is a higher power.

If so, I think it's money.

Larry Nusbaum said...

So, based on your comment at 8:57 pm, would I be considered a "real estate junkie"?

Gemma Star said...

Probably, Larry. Maybe we can modify the 12-step program for your speciality addiction.