Checking the Scale
Checking the Scale
How trading/investing is like weight loss
Every investor is wildly different. We all have different goals, thoughts, feelings, and approaches. A unique way to understand these differences is to liken the investing journey to a weight-loss program. Strange, however the comparison holds several similarities that can help demystify the complex realm of trading and investment.
Mr. Strict
The day trader is embarking on a strict diet plan, where regular check-ins and adjustments are crucial. As a short term trader, you are the equivalent of someone dedicated to an intensive weight loss regime. You monitor the market's every move, just as a dieter micro manages calorie intake and steps and lifting sessions.
For example, if you're focused on technology stocks, it's as if you're following a precise meal plan, knowing the exact calorie count of every food item you consume. You aim for a specific daily caloric deficit, akin to seeking profitable trades each day. Just as the dieter is expected to adjust their meal plan based on daily weight fluctuations, the day trader must be ready to pivot their strategy based on the market's whims. Sound like you?
Mr. Lifestyle Change
Long-term investing is akin to a comprehensive shift in day to day life focused on gradual, sustainable health improvement. As a long duration investor, you're like someone committed to a balanced diet and regular exercise, with an eye on the long-term benefits, not the fleeting satisfaction or frustration of instant results.
For instance, suppose you are a long-term investor in a diversified portfolio, including stocks, bonds, and ETFs. In that case, you're much like someone who's opted for a balanced diet, complete with all the necessary nutrients and a regular fitness routine. You know some days might be tough; the scale may not always reflect the effort you're putting in. Yet, you understand that maintaining this balance will lead to steady, positive results over time.
Checking your portfolio every day, reacting to every market fluctuation, could be as counterproductive as obsessing over daily weight changes. These fluctuations may induce stress and prompt rash decisions that deviate from your original investment plan. Sound like you?
Balance
As a long-term investor, the emphasis should be on the bigger picture, sticking to your well-researched investment strategy. This strategy, like a comprehensive health plan, should factor in a good risk/reward balance, allowing for occasional indulgences or riskier bets. Aka everyone wants to degen once in awhile!
Let's say you've invested in a new, promising tech startup. It's similar to trying out a new, challenging workout routine. There's potential for high reward (rapid weight loss or significant stock appreciation), but also a degree of risk involved. Because you've balanced this with more stable investments (or a generally healthy diet), you're prepared for different outcomes without jeopardizing your overall plan.
There isn’t a right or wrong here, but aligning your ideal style of trading with the way you feel best about approaching weight loss is oddly similar. Then again I have a dad bod… let’s just call that “balance”.
GL and keep your seat at the table!
Jaymes R.