This year marks my 14th year of being active in the stock market. I opened my first demat account in 2011 when I was 19 years old. Over the course of all these years, I have gained a lot of experience – good and bad both. Now as I approach my mid 30s, I think I have finally made the transition over to long-term investing.
Why this switch?
Well, the main reason is that I have finally realized and accepted the fact that short-term trading is unsustainable over long periods of time. More than the market, the reason it doesn’t work over long-term is because of the way human brain is wired. We are irrational creatures by design and we are ruled by our primal brain which controls the core emotions – fear and greed.
Controlling these emotions is an extremely challenging cognitive endeavor. With deliberate practice, you do learn to control these emotions but here’s the big thing that I have learnt with experience – you can exert full control over your emotions for short periods of time but eventually the primal brain will win, every single time. It’s just the way the brain is physically built!
And this cycle of self-control and emotional takeover is never ending. Correlating it to the markets, when you feel you’re in control, you will do good in the market but eventually you WILL make mistakes when the emotions take over. And I emphasize this again – emotions will eventually overpower your rationality.
I guess, it’s part of the learning process. It is only after having gone through the foolish stupidity of my 20s where I believed I am different from others and I can crack the market did my 33 years old self realize that it’s impossible. It’s physically impossible.
To be old and wise, you first have to be young and stupid.
I could not agree to this quote any more.
Environment over Willpower
Another thing that I have learnt now is that your environment will always be more powerful than your willpower. Basically, external enforcement works much better than internal enforcement.
So how does that apply to the stock market? The age old adage of SIPs! It works because it is automated behavior and you don’t really have to worry about making any decision while investing. Of course, the returns are not eye popping but the peace of mind is totally worth it.
Last year I learnt about executive functions of the brain and it was a game changer. Since then I have been actively practicing it.
Migrating to long-term investing
After having known the above mentioned realizations, I have finally implemented the plan to switch completely to automatic SIP based long-term investing. I have setup automatic, recurring investments in both US and Indian stock markets.
I am hoping that this transition will open up new perspectives and milestones.
