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Wellness Wednesday for February 21, 2024

The Wednesday Wellness threads are meant to encourage users to ask for and provide advice and motivation to improve their lives. It isn't intended as a 'containment thread' and any content which could go here could instead be posted in its own thread. You could post:

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"Coulda woulda shoulda" - risk, decisions, regrets, emotional warnings. I need some help with this. I have some degree of alexithymia (inability to identify and understand some of my own emotions) which probably complicates it.

When I'm considering a risky decision that could go right or wrong, be profitable or cause loss - I get this emotional-physical sensation in a quite central area of my being: sometimes stomach, sometimes heart, sometimes closer to the middle of the spine. It can be big but always somewhat vague. It can be strong and convincing though. It seems to communicate "just don't do it, stay away". I suppose its mission is to protech me from pain. Emotional pain. This does not necessarily protect me from wordly loss, or from loss of opportunity. And, let's say this comes up during an investment decision I'm considering: it doesn't seem to be the potential loss of money itself that seems most horrible. What seems most horrible is the emotion from making a mistake. As if I couldn't live with the emotional pain from it, or what the mistake would say about me as a person... What is most bizarre is that I am also afraid and avoidant of making the right decision. For instance, if I identified an investment a few years ago that I "should have" just bought into right then and there, but didn't, the regret about it, according to the emotional warning, will become threatening if I buy in now and it still keeps going up. Because then the original mistake would be even bigger, in a sense. "Better to avoid the entire thing."

This avoidance behavior has cost me many millions of dollars over the years. Have any of you worked through this kind of thing, or know what it's truly about?

I mean, given the only context is handling large quantities of money in specific investments, I think it's not improper to just admit to yourself you aren't cut out for it. Bog standard advice is to just invest monthly in an index fund for a reason. Unless this is effecting other areas of your life, I'd consider the fact that you are just a normie and move on.

Avoiding making mistakes is typically a perfectionist issue, and can lead to risk avoidance.

And anxieties about money are very common.

The standard response that I would recommend in your case is figure out what your investment timeline and risk tolerance ought to be in terms of stocks/bonds/REITs, then start investing in low-cost index funds.

And just don’t look at the numbers.

Automate that shit and avoid being triggered. A financial advisor might be called for, but you have to be careful because boy are incentives misaligned there by default. If you want to get to the point where you can make investment decisions in a car-by-case basis it sounds like you might have to invest in formal therapy.

A tale of caution:

I had an older coworker who was very conservatively invested even though his house was paid off, he and his wife still had a decade of career left, and their kids were doing well with college paid for.

So I explained that standard advice would be he should adjust his portfolio, and he agreed it made sense to shift his allocation towards stocks.

This was in late 2019.

So, naturally, the anxiety that had led him to avoid optimal exposure to stock over the years caused him to sell when the market plunged. He listened to me give standard advice once, but didn’t talk to me when he got nervous. Emotionally, now it’s even worse because COVID did not destroy stock values forever and so obviously my “buy and hold” advice was right because it always is, short of a level of catastrophe the US has never experienced.

So he lost a painful chunk of his portfolio and, I imagine, hasn’t tried to reallocate back towards stock. So he locked in losses and now has a low-growth portfolio. He’ll be fine overall with his decent pension and responsible living for decades (a Jew married to a Korean, so relevant stereotypes apply), even if his investments were zeroed out. (That’s why I thought he would do well with accepting more variance in his portfolio… but actually risk aversion was the driving force.)

I’d feel bad about it but for the fact that level of emotional incompetence can’t be helped in someone old enough to have lived through the dotcom and 2008 crashes as an adult.

I’d feel bad about it but for the fact that level of emotional incompetence can’t be helped in someone old enough to have lived through the dotcom and 2008 crashes as an adult.

You know, the funny thing about this is that, unless you were invested in stocks at the time of the dotcom bubble or the 2008 crash, it won't help your emotional incompetence. Part of my learning to stay calm and hodl on was panic selling my 2 year old 401k (moved from stocks to money market) at the bottom. I had just started working, I had a very small amount in it, and it was a valuable lesson I had to learn the hard way. Sure would have sucked to have put that off for 40 years instead.

Well the individual in question was old enough to have had been invested in some stock during both. He was just in a conservative portfolio in his mid-50s (so he lost out on a ton of growth over 30 years). When I talked to my dad (same rough age) about investing he definitely knew the lesson of not pulling out in a downturn.

But overall I think you’re right about most people. I had also got my first adult job just before the 2008 crash and I was in a position where I had put a hell of a lot of my pay into my investment fund. (I was in the military so I didn’t have a lot of extra expenses for a few years.) It sucked watching the numbers go down but it wasn’t like pulling out a few grand ~40 years before I hit retirement was going to make sense. And I had read enough about buying and holding to not be tempted.

Thanks for the reply.

Yes, the advice in the book I'm reading on investing is to put most of ones money into a low cost index fund and to automate the adding of more per month. It's not particularly fun though, and the desire to "time the market" is coming up. But I'll do it, I think. I'll keep some money in cash (high % savings account with quick withdrawals) and perhaps bonds, for which to use to buy cheap stocks after the next crash. There's always another crash. Once every 6-12 years, I've read.

I intend to succeed in resolving the emotional issues around this, because I don't like the idea of giving up and accepting pains and limitations when they can be repaired, and because risk aversion and avoidance affects other areas of life too. I've worked through much bigger problems in the past. Meditation and CBT are great for me. Formal therapy less so, but maybe I was unlucky. I've started on CBT exercises prescribed in the book Woulda Coulda Shoulda and I'm softening the stress responses related to risk/loss by bringing them up in my meditations.

I've got time to put into learning about investments, economics, company analysis etc, so that's another motivation to get to a point where I can gamble a bit on individual stocks. :) Something like 10% of my savings will go to this.

The tale: Locking in losses, ouch, I did that too. Though in my defense I was very young and was wrecked by illness at the time. Investing is an area where "once burned, twice shy" can become very expensive through missing out on the recovery. Losing money seems to be very closely tied into starting up some serious stress, existential anxiety and poor thinking. It seems that even one major painful stimuli can establish a belief of "it'll crash again as soon as I risk money again, I just know it" or something like that.

Keep in mind that if you run some scenarios on holding bonds to buy cheap stocks during cyclic downturns you might find that timing the market (even optimistically doing so near optimally) might not pan out because of lost gains during all the years when stocks just did average.

You bring up another good point that I know some people do and I wish I did (or could do, now; I have a job that prohibits playing the stock game). Some people employ a strategy that’s like “90% boring index funds and assets based on standard investing advice” combined with “10% YOLO/WallStreet Bets/trying to beat the market”. Helps scratch the day trader itch and limits downside risk ruining one’s retirement.

Something like that, having a set level of risk, might help you edge away from the anxiety.

Sorry about the late reply.

Keep in mind that if you run some scenarios on holding bonds to buy cheap stocks during cyclic downturns you might find that timing the market (even optimistically doing so near optimally) might not pan out because of lost gains during all the years when stocks just did average.

I have thought about this. The old quote comes to mind: "The market can stay irrational longer than you can stay solvent." Even if there 'should' be a correction coming, the fed and others might kick the can down the road for a long time. Years of growth, so that the loss that comes from a crash might not even wipe out all the gains.

I've thought about the possiblity of selling non-callable bonds when interest rates go down. That makes them more valuable. But I'm not sure exactly how to buy them and how to sell them. And what if the markets crater without the interest rates actually going down? What if inflation is high at the same time?

Shrug

I probably have similar feelings. One thing which I've been thinking about lately is that the reason I try to do well at work, and the reason I'm afraid to get fired has more to do with wanting to avoid making a mistake and also to avoid the shame of it, as opposed to actually fearing that I won't be able to get another job. I also fear a spiral of self-blame and shame that could lead to me being unemployed and unemployable.

Also I have what I expect might be a similar feeling in my heart/chest when something occurs to me that could be big and impacting. This could be for things like having a (maybe true or not) realization that if I screw up a particular project or even a meeting I'm in, that this could be the start of the end for me at my job. Or it could even be different, like when I used to be single and would realize that I was in an opportunity to make a move on someone I was interested in.

I think for me, a lot of it is about that it's much easier to deal with life if you don't think about it as real. I lament the fact that I'm not living in a video game where I can just undo bad mistakes, I hate the permanence of it all. It's stupid of me, but that's just the way I feel, and I'm much better able to deal with making decisions if I put it in a sandbox, and think as if it's just something I'm trying out, that is not life affecting. I'm fortunate that I live in a part of the world that affords me enough disconnect from some harsh realities of life, that this strategy is doable. Also, SSRIs help me with this, too. Without them I'm a wreck who is always feeling the harsh reality of permanence, and I'm paralyzed.

Also, if you don't mind me asking, what sort of investments do you deal in that have the potential to make millions on over a few years? Are they real estate investments, or stocks, or something else? How does one learn to get into that sort of investing? All I do is index funds, because that's all I ever was taught about.

I've now found + started reading a book called, literally: Woulda, Coulda, Shoulda: Overcoming Regrets, Mistakes, and Missed Opportunities.

It seems pretty good. Something that resonated with me that the book describes is how incredibly tough I was on myself for my mistakes. Giving myself a harsh punishment over choices that were actually pretty reasonable. The "punishment" is what kept me from being able to take advantage of the next opportunities, which were still really big ones, just not as big as the first ones. I'm gonna do the CBT exercise in it where you list all your regrets and what should/could have happened, and what cognitive fallacy is being committed. I think hanging onto past mistakes is the core of my issue.

It's funny that you talk about permanence as a problem, when that's a thing that does not really exist. A couple hundred years down the line, it'll be as if you never existed. Your choices, forgotten. Most people have a problem with impermanence, the end of things, because all lives and things in this universe must come to an end. Anyway, I think I know what you mean, you lament that what happens is basically written in stone and can't be changed. May as well stop trying to undo anything. Wishing for a better past, and making the emotional stakes so high that every decision feels intense, is unskillful.

I don't recommend using "it's not real" as the antidote. What makes suffering into suffering is the presence of all four things: Conscious, Ownership, Negative valence, Real. If one of these factors is removed we don't suffer. But the one to remove is the ownership part. This is the most important teaching in Buddhism: anatta insight; not-self. The body, your emotions, thoughts, etc, come and go on their own, so why would you try to maintain an illusion of being in control of and owning them? Why would you look at that which functions autonomously and say "this is me, this is mine, this is my self"? :)

Potential to make millions in the past: I'm talking about cryptocurrencies. Many years ago now, but the mistakes were emotionally intense. I was young and poor and the loss of what was a pretty small amount of money felt so bad to my depressed and anxious mind that I kept myself from jumping back in and riding the wild upswing after a crash. These days I'm not likely to find any opportunities to make millions. But I have more money now. What I want is to make measured decisions for stock purchases and the like. I'll probably stick most of my savings into an index fund though. That seems to be the wise thing to do for anyone who does not have tons of time to sink into doing research. So you're probably doing the best thing you can do on that part. :)

I'll probably stick most of my savings into an index fund though. That seems to be the wise thing to do for anyone who does not have tons of time to sink into doing research. So you're probably doing the best thing you can do on that part. :)

I want to also add, it's not just research. It's the temperament, and probably also the income level, to routinely lose 50-100% of the money you have put down on certain investments, but you make enough good decisions to be up overall.

It's possible I'm a version of you that made moderately more impulsive/confident decisions. I lost a ton of money on CGC because I bought into a bubble, MO because of regulatory nanny state bullshit I probably should have seen coming, even MMM because of some pretty massive lawsuits they were on the wrong side of. However I made out like a bandit on NTDOY, NVDA, V and MSFT. And BTC of course. Still waiting to see how my bets pan out with COIN and INTC. Bought the COIN IPO which I've been kicking myself for, but since I thought it was good at $380 I thought it was even better at $35 and cost averaged down a ton. I still believe they will have a monopoly in the US thanks to regulatory capture. And INTC I still think will rise back to being a premier fab with Gelsinger back at the helm. China invading Taiwan might help some too.

Is cost averaging a real and prudent thing or more of a cope? Honest question, hehe.

Have you considered uranium and gold? Mining companies or otherwise.

I quite like the sound of Intel. A good CEO seems to make a huge difference to a company and its stock. I have some interest in Berkshire Hathaway, they're already up 17% YTD. Buffett won't last forever but he hires great people, so maybe it could be good to buy them during the inevitable slump after his retirement/death...?

I'm a newb to all this though. I'll keep reading. Next up is to do my first attempt at company analysis, starting by just finding book value, diluted EPS, etc.

Is cost averaging a real and prudent thing or more of a cope? Honest question, hehe.

I cost average because I have no idea what I'm doing. My most successful picks have been jumping at companies I like. I played the Nintendo Switch, and Breath of the Wild, before it was released and decided it was the real deal. This was at a time when everyone thought Nintendo should get out of the hardware business, and it's executives has taken pay cuts for their failures. It was deeply rewarding jumping on that stock.

I bought Nvidia back in 2017/18 because the Steam hardware survey routinely showed something like 80% of people had Nvidia GPUs. I've been an Nvidia lifer since my first Riva 128. Seemed like a no brainer to me. I can't say I ever saw this AI boom coming, but I knew they were a well run company with good products I use to the exclusion of all else.

I dollar cost average in because I mostly buy and hold forever, so investing cash comes at a slow and steady pace monthly. I also know I'm not educated enough to pick an entry price and throw down five or six figures on it all at once. I keep investing if I have faith the company will eventually do well (like COIN), or because they've been consistently rewarding (like V).

Sometimes I take profit. I had to pay off a $5000 vet bill once while I was saving for a house, so it came out of stocks. When ATVI got bought out I was forced to sell. I also finally cut a bunch of losses and took some profit from several stocks, when I threw down a fat wad on COIN.

Throwing down that fat wad on COIN turned out to be a terrible mistake, and that particular wad is still down over 50%. But like I said, I liked COIN at IPO prices, and I liked it 10x as much when it was 1/10th the price. So it all worked out in the end. Still, that was an expensive lesson. In the future I won't be doing that. I should have spread my wad out over a much longer time to be safe. If it goes up, good, if it goes down, that's alright too.