How do you prevent second-guessing of your investments?

[PauletteGoddard]

We've heard of buyer's remorse, is there an "investor's remorse?"

I believe I might be pushing my financial goals farther from reach owing to fear that I won't make the right decision with my bundle. Striving is easier than managing.

What thinking processes do you go through to prevent self-doubt and minimize the opportunity cost of investment? For example, "Charo" has saved $10,767 in her savings account and aims to have $18,000 at some point. A Money Market Account offering 4.3% with a minimum $10K deposit intrigues her, but Charo fears that the moment she moves that money, there'll be a car accident/emergency medical expense/leaky roof that needs replacement. Or she's looking at purchasing the Vice Fund for her Roth IRA but she worries she won't have the capital to take advantage of dips by loading up on existing holdings.

Maybe I should ask along with the "what thinking processes..." what safety buffer you allow so your money stays earning interest as long as possible. How do you prevent being overwhelmed with "what if" scenarios? How do you fight fear and inertia?

[Broken Arrow]

I think there is most definitely such as thing as "investor's remorse". I'm pretty sure because I have that myself. Yeah, I can't tell you how many times I've debated with myself over my high stakes in international funds, while not considering bonds (if nothing else, for diversification purposes).

I guess one thing that helps is to continue to pore over your technical analysis. A good plan will still be a good plan, even in the face of our own doubts. It's comforting sometimes.

Another thing is to simply have faith in our own decision. Have confidence, even if we have to fake it.

If all else fails, I would change the portfolio. In the end, this is your money, and it has to be allocated in a way that will make you the happiest.

As for "Charo", I wouldn't worry about her investing in a Money Market fund. They're quite liquid, and you can write checks from it to pay for any unforseen emergency that might come up.

On the other hand, "Charo" may also want to know that Money Market Funds aren't paying very well right now. My online savings account is paying 5%, but Money Markets are currently in the range of 3% to 4%.

[disneysteve]

What thinking processes do you go through to prevent self-doubt and minimize the opportunity cost of investment?

what safety buffer you allow so your money stays earning interest as long as possible. How do you prevent being overwhelmed with "what if" scenarios? How do you fight fear and inertia?

I think the key is what David Bach preaches and that is to automate things as much as possible. Arrange to have a set amount of money go into your investments each month no matter what. Just as 401K contributions are deducted from your paycheck, have other things deducted from your checking account.

Either that or sit down and draw up an investment plan with detailed guidelines as to where you will send your money each month... and then follow it.

I currently invest 18% of my gross pay each check (every 2 weeks). $200 goes to mutual fund A automatically. $100 goes to mutual fund B automatically. $400 goes to DD's 529 plan automatically. The remainder I manually send to either my Roth or my wife's Roth (I alternate) until both are fully funded for the year. Once they are, I then send that amount manually as an extra principal payment on our HEL. So I'm partly automated and the part that isn't automatic is still predetermined regarding the amount and the destination. I don't have to make any decisions. They've all been made previously.

[katwoman]

Here's what I do - and this applies only to individual stocks and nothing else since I don't buy mutual funds or bonds etc. - I treat each stock as though I was considering a new relationship.

Yup, crazy as it sounds all that glitters is not gold. If there's one I'm interested in I put it on my watch list over at Fidelity's website and check on how it's doing day -to-day. I look to see how it reacts to news, politics, weather, seasons, the Fed, whatever. Once I feel comfortable and the time is right I go in and buy but only after I've gotten to know and like the stock. Once it's bought I check on it's performance weekly. Heck, I check on the watchlist stocks more than I check on the stocks I own!

Have there been mistakes? No, more like disappointments. But none that I'd kick to the curb. Once I'm commited I'm in for the long haul since I chose well from the start. Like any relationship you gotta give it time and hope for the best (after having done your due diligence, of course).

EDIT: Actually there is one stock I've got my eye on but despite it's wonderful potential it's a fickle little sucker (volatile). Runs hot/cold. Very exciting and nerve racking. I'm considering this as a daliance in my new HSA account.

[jIM_Ohio]

We've heard of buyer's remorse, is there an "investor's remorse?"

I believe I might be pushing my financial goals farther from reach owing to fear that I won't make the right decision with my bundle. Striving is easier than managing.

What thinking processes do you go through to prevent self-doubt and minimize the opportunity cost of investment? For example, "Charo" has saved $10,767 in her savings account and aims to have $18,000 at some point. A Money Market Account offering 4.3% with a minimum $10K deposit intrigues her, but Charo fears that the moment she moves that money, there'll be a car accident/emergency medical expense/leaky roof that needs replacement. Or she's looking at purchasing the Vice Fund for her Roth IRA but she worries she won't have the capital to take advantage of dips by loading up on existing holdings.

Maybe I should ask along with the "what thinking processes..." what safety buffer you allow so your money stays earning interest as long as possible. How do you prevent being overwhelmed with "what if" scenarios? How do you fight fear and inertia?

I think people which second guess themselves really don't understand all their risks.

For example, in the case above, maybe move the money to account in two deposits over 3 weeks so half the money is always accessible.

I make many financial decisions. Others look at some of the decisions as big... where as I treat them more mechanical. For example how many posts do we read about choosing x-y-z mutual funds... earlier this year I had to rollover most of my retirement funds (70k of 120k) and had to pick the funds. I knew my allocation, looked at T Rowe funds, made my choices and didn't blink about it, whole thing took maybe 30 minutes.

I know the risks I need to take, I know what I am willing to take, and know when I rebalance and reassess each year (December and June). My outlook calander at work even reminds me.

So I don't look at account balances much, don't watch my individual funds much... because I know what my allocation is, know which funds make it up, and even when I choose a new fund, (I chose 2 new ones when rolling over), the decision is calculated.

For example over next 4 years, I plan on adding 5 new funds to my portfolio. I am researching each right now

(Permanent Portfolio PRFPX, Alpine Dynamic Dividend ADVDX Ultra Bull ULPIX and a mid cap and small cap fund as well -CGM Focus and Manning/Napier come to mind. I have multiple picks for the mid and small caps, so that decision is what I research right now in my spare time.