Editor’s Note: In today’s Weekend Edition of The Palm Beach Daily, we’re pleased to welcome back Palm Beach Research Group Editor-in-Chief Jeff Remsburg. As global markets churn with fear right now, Jeff shares how he learned to banish fear from his own investment decision-making… and how you can do it too.
I paced in front of the television, spasms of white-hot anxiety ripping through my chest. I was about to lose thousands of dollars…
I hung on to every fear-drenched word coming from the “financial expert” on my TV.
“This bull market is totally manipulated by the Federal Reserve! Real corporate earnings can’t support it! Plus, it’s nearly three years old! Believe me: It’s going to turn any day—and when it does, it’s going to be brutal.”
He stretched the last word for maximum effect… “Bruuuuuuutaaaaal.”
I stopped pacing. Wide-eyed silence. I was terrified—certain this impending market crash was going to happen… certain it was going to cripple my portfolio.
It was late November, 2011. Like so many other people, my scars from 2008/2009 were still too fresh. And though my portfolio had been recovering, I was on edge…
After nearly three years of gunning higher, the bull market felt like it was sputtering. From July to August of 2011, the Dow plunged nearly 15%. Another 7% drop had just rattled November. These pullbacks felt like the wobbly kneed stagger of a dazed boxer. Just one more jab would land a knockout.
What made it worse was the chorus of “experts” calling for a market disaster. The TV, papers, and Internet were all filled with headlines and sound bites proclaiming doom and gloom. I was finding it harder to ignore them.
I started to listen…
That was my critical mistake… and it would end badly.
You see, when I started paying attention to the financial media, my focus began to drift… slowly… imperceptibly…
Instead of objectively evaluating my stocks, I started watching “the market”; instead of researching my companies’ earnings potential, I began speculating on the severity of the soon-to-come “market collapse”; instead of focusing on maximizing long-term gains, I began obsessing over preventing short-term losses.
The analyst on my television scowled and raised his hand like a revivalist preacher…
“Tell me… This bull market has—at best—another 5% upside? Are you going to risk gutting your portfolio in this crash, just to squeeze out another 5%?”
That’s the line that got me.
On pure impulse, I sprung off my couch. Within seconds, I was on my computer, logging into my brokerage account. We all know how this story ends…
Friends, over the last few weeks, I’ve noticed an uptick in the number of “nervous” emails from subscribers. And I’ve noticed general references to “the market” and “the correction that will come” and “so-and-so on TV who says this can’t last… ” These emails sound eerily familiar. I was saying the same thing that day in 2011.
So if you’ll let me, I’d like to speak to those who can relate to my story—who might be feeling similarly right now. Nothing I’ll write is groundbreaking… but sometimes we just need a reminder.
Fear is one of the most crippling forces in investing. It’s toxic. And so, to prevent it, let’s trace back its roots.
For the average investor, where does fear begin?
If you thought I was going to say “the financial media”… you’re wrong.
The real source… is you and me. Specifically, it’s the decision we make as to what information we choose to focus on.
The financial media, with all its hype and careless chatter, simply preys upon our poor “focus” decision. It’s the kerosene on the match.
Hold that thought for a moment. We’ll come back to it…
In the months and years after November 2011, I studied my mistake. My error was simple: I had taken my eyes off my stocks, and instead, focused them on the headlines.
I was entranced by the drama of “debt ceilings,” “U.S. downgrades,” “Cyprus contagion,” or whatever it was back then. Financial soap operas.
Meanwhile, the truth of the intrinsic strength of my portfolio faded into the background…
After this realization, I made a promise to myself: I would never again let headlines and sound bites replace my own firsthand knowledge of my stocks. So I did something…
I made a conscious decision to refocus.
For several months, I did my best to ignore all media-editorializing. No more Mad Money; no more editorials on Yahoo Finance; no more market forecasts from CNBC…
I spent that time studying the companies I owned. I became more familiar with their financial statements; I researched their place in their industries; I discovered their real values relative to their market prices. And, yes, I got rid of some stocks…
But as I did this, something big happened… Fear evaporated. I knew the value of the stocks I owned. Armed with this truth, the dramas unfolding in the headlines felt peripheral.
Few things destroy fear faster than knowledge. It’s hard to remain scared when you can point toward truths that disarm those fears.
So where does knowledge come from in investing? It comes from a decision you make to focus on your own stocks—instead of the guy on TV predicting colossal portfolio damage because of oil, or Greece, or whatever.
(Our analysts here at the Palm Beach Research Group do a fantastic job of giving you this knowledge. For instance, I have never seen any analyst go to greater lengths to give his subscribers the truth than Teeka Tiwari. He understands the importance of focusing not on fear, but on the opportunities it provides. If you missed his market commentary yesterday, please click here.)
When I became well-versed in the stocks I owned, I was shocked by many financial talking heads. They oversimplified. The made huge assumptions. They cherry-picked.
Their analyses could have scared me out of some positions. But by then, I knew better.
When you really know the value of what you own, you prevent fear from taking a foothold… The headlines and sound bites will still be dripping with kerosene… but you’re no longer holding a match.
Today, I encourage you to answer this question: What are you focusing on? Fact or fear?
If it’s fear, I recommend you experiment with ignoring the headlines for a while. Instead, pick up the latest financial statements of your stocks. If you don’t know what to look for, I’ll help you in the essays to come.
And I promise you this: After you commit to this focus decision, you’ll see the difference in your quality of sleep… not to mention your portfolio balance.
Editor-in-Chief, Palm Beach Research Group