If you’ve been in the market for some time, you might know what I mean.
The stock goes up, and you feel ecstatic.
The stock goes down, and you feel it’s the end of the world.
In fact, your mental health for the week is determined by the ups and downs of stock prices.
Most of the time, you wonder whether all of this is worth it.
Will I make some gains?
Or will I lose everything?
If this is you, I was there too.
In fact, it was not just me; other of my investor friends felt what you’re going through.
What If I tell you, there is a more SANE way to do investing, safeguarding your mental health WHILE making profit.
How much better would your sleep and your quality of life be if you could invest like this?
You’ve probably heard this saying:
“A wise investor minimizes their emotional involvement while making investment decisions.”
In this article, I’ll tell you what I’ve learned and implemented from the great Warren Buffet himself.
This method allows me to sleep peacefully at night, safeguard my mental health, and make profit.
Read on below:
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Source of Stress : Market Volatility
The ups and downs of the stock market, e.g., market volatility, are part and parcel of investment.
And as you’ve likely experienced before, it’s the main source of our mental anguish and stress.
If we are investing for a long time, we will subject ourselves to these stresses.
But prolonged exposure to stress is never good.
I have colleagues or friends who have suffered from burnout before in their line of work (non-investment).
You may have firsthand experience in your line of work, and I bet you swear you will never do that to yourself again.
So did I.
Especially now that I am married and have a family and a baby, my health needs to be at the forefront of my mind.
I can’t afford to have burnouts.
Back to the prolonged exposure to stress: the goal is to reduce this effect as we continue in our investment journey.
Now, if only we could minimize market volatility, e.g., the source of investment stress, but unfortunately, we, the common folk, have no way to influence that.
We would have done so a long time ago, if we could.
So, I learned the Warren Buffett Way, and I can’t believe it’s this simple.
His investing method that allows him to sleep peacefully at night, safeguarding his mental health while making profit, can be summarized in 7 words:
“Commit, hold on, and don’t let go.”
Let me explain what it means.
The Golden Method to Manage Stress While Investing and PROFIT!
If you have done your fundamental analysis correctly, then his method makes sense.
Let’s consider when you’ve invested $50,000 in a company (say, Company A), and it has excellent fundamentals.
Not long after, the price plummeted by 10%.
Despair fills your heart since you’ve just lost $5,000.
The above are realistic scenarios that happen to many investors, and I will guarantee you will encounter them multiple times.
Most people would sell IMMEDIATELY and take the loss.
But not you, and neither does Warren Buffett.
It’s very easy to get nervous, but the ACTUAL winning strategy is to HOLD the fort and weather the storm.
You’ve done the analysis, and Company A is still an excellent company to invest in.
Some real-life examples: Apple, Amazon, Coca-Cola, Johnson & Johnson, and P&G.
How many times since their inception has their stock price plummeted?
But if you held through those periods until now, you would have tens of millions.
These companies have stood the test of time and delivered excellent results for their shareholders.
This is the unspoken rule of the stock market: good fundamentals AND LONG term hold will weather any storm.
The reason Warren Buffet can sleep at night is that he considers price drops to be noise.
Eventually, as time goes on, the price will go back and go beyond.
He just NEEDS time to work its magic, e.g., time will correct all wrongs.
This mentality is what I adopt, and it makes my investment pretty stress-free.
Knowing that I just need to let time do its work and the price will correct itself back to its normal level.
Understand that this is ONLY if the company has good fundamentals.
Bad companies will just crash and burn.
Another thing that Warren Buffet does when the price of a good company drops is that he invests MORE in it.
Strange right?
But this is what makes him TOP DOLLAR, and cements his position as the top investor in the world.
Let me explain.
The Golden Method to Manage Stress While Investing and Making TOP DOLLAR!
Let me make an analogy.
Consider company A, the company with excellent fundamentals, as a Louis Vuitton bag.
A normal Louis Vuitton bag costs $1,500 per bag, roughly.
Imagine if you can get the bag for $100; you’ve got yourself a bargain, right?
In fact, you buy it for $100 and resell it for close to the original price of $1,500.
That’s a nice, decent $1,400 profit there.
This is Warren Buffet’s mindset when he sees the stock price of a good company plummet.
He saw a BARGAIN!
So he bought the “Louis Vutton bag,” e.g., the stock, knowing that he could resell it at a higher price at a later time.
Again, this is what makes him TOP dollar.
He invests more when the stock price plummets, knowing that the price will go back up to its normal level or beyond at a later date.
He allows Father Time to do its magic again.
Take his past investment in Coca-Cola.
The company’s stock was deeply discounted after the Black Monday stock market crash in October 1987, despite nothing fundamentally changing with its business.
Buffett saw this as a chance to invest, and between 1988 and 1989, he bought over 23 million shares.
Since the beginning of 1988, Coca-Cola’s total return has been more than 5,800%, turning every $1,000 invested into $58,000.
To put this in perspective, if you make a $50,000 investment back then, it’ll turn into $2.9 million now.
Buying at the right time affords you this level of passive cash.
QUICK WINS
STRESS FREE INVESTING GUIDELINES
“Commit, hold on, don’t let go”
Remember these gems:
- Good fundamentals AND long term hold will weather any storm.
- Time will correct all wrongs. Adopt long term hold in your strategy.
- Price drops are noise in the short term.
- Invest MORE when stock price plummets.
All of the above are only valid if the company has a good fundamentals.
Stress Free Investment REQUIRES Mastery of Fundamental Analysis
I stressed a lot in this article that all of the methods above only work with companies with good fundamentals.
Essentially, good fundamentals mean a company you invest in is not just “immune” to bankruptcy (can pay short- and long-term debt), but also profitable, growing, stable (not volatile), and run by a competent management team, amongst many other things.
I have written some articles on the fundamental analysis below:
That is why I developed SFA Investment Class.
A one-year guided class and mentorship in which you learn about all the important criterias, and how to use them so that you can start seeing REAL results.
In the program, I give :
- In-depth stock investment knowledge that leaves no stone unturned.
- One-on-one mentoring that guides my students through the entire process.
- Action Plans for applying what my student’s learned to real-world investments.
- Practical Tips.
- Weekly updates of current economic and investing insight.
I also put my students in a private Whatsapp group where they will meet others in the same situation as them, as well as having direct access to mentors and group discussions.
I like to promote the spirit of camaraderie in investments, as I feel is few and far between in the industry.
Some of my students now are doing investment together where they analyze different stocks from multitudes of industry, collate the analysis, rank the top performance, and invest there. Its great to see.
Anyways, if the above program fits you, I would like you to be part of the team>>
I guarantee that within the first two months, you will feel far more confident about your investments, and have a solid plan in place to achieve your financial objectives.
Either I’see you in the class, or in the next article.
Until then..
James Lim
SFA Founder
Member of Australian Investors Association (AIA)
The University of Queensland Speaker
