Bleeding out under control

While at work I happened to spy out of the corner of my eye a little bit of a dip in the markets - I find it pretty crazy how much "technical value" can be wiped out of my portfolio in such a short time without me panicking.

Just before seeing this, I was talking to a colleague about fears and explained to him my process of psychological pyromania, where I mentally simulate worst case scenarios and try to find ways out. When I do find a potential bridge, I burn it down and look for another. I do this until there are no bridges left and I am trapped alone on an island, locked in a room with no doors.

This is far from a pleasant experience, as I explore topics that are very personal, highly disruptive and are emotionally charged - and following them to the depth of potential worst case means "experiencing" them.

While not real and determined by past experience and imagination - they definitely evoke a lot of emotional discomfort. The mind is incredibly powerful when applied well or allowed to roam free and while easy to dismiss, it can imagine the monsters under the bed to such a degree that there are physical reactions - faster heart beat, sweating palms, a desire to hide away.

It is perhaps a strange game to play to watch yourself "bleed out" in your imagination across circumstances that one would never want to happen. Yet, as I said to my colleague, we have the ability to play roles in our life and we do - if we only practice playing the roles we enjoy and make us feel good, when the inevitable discomfort arises, we are unprepared.

Confidence isn't knowing what to do, it is knowing that in a situation, the skills are there to be able to cope when not knowing. The simulations I run aren't about knowing more although they can help, it is about learning to manage my reactions and affect my default behaviors.

I have said before that my approach and probably a good approach to investing is to assume that whatever is invested is already lost - meaning that anything from that point up is not the worst case scenario. I am sure other people say they do this, but have they really prepared for the total decimation of their investment? Unlikely, as that situation is unlikely to occur - but it could.

I know that at times of large dips (this is a small dip) people tend to panic and act far more erratically than they would normally, but perhaps this is because they haven't practiced a "normal" for the negative circumstances, it is left up to chance. And normally fears will arise and the monsters under the bed seem larger and much more real - and the body reacts in a fight or flight response or perhaps a third position of frozen.

Sometimes of course, it is better to walk away and get some space if the panic means acting irrationally, acting in ways one wouldn't want to act in better times. But it is hard when one feels that they are bleeding out and all they want to do is stem the flow.

When it comes to investing, everyone is built for the good times - the heroes are are mad in the bad.

Which are you? Just imagine it.

Taraz [ Gen1: Hive ]