Published 2/2/08 (Modified 3/8/11)
By MoneyBlueBook

I think it's time all market investors learn to turn their backs on the daily stock ticker blips coming out of Wall Street - not completely, but just enough to regain their emotional composure so they can properly implement the correct long term investment strategy.

Don't Gamble Your Money Away - Invest For the Long Term

Not too long ago, I wrote about one of the biggest dangers to rational investing - emotional trading based on panic buying and selling. The wise and prudent investor should put aside irrational emotions, and always invest for the long term if they can help it. Unless you are very close to retirement, your investment plan should be to hold for the long haul. When you invest for the short term and try to make some fast money, you cease to become an investor and transform into a gambling market timer. But financially, day traders and gamblers live and die by the sword. Yes it is certainly exciting when you occasionally can make a quick 50% profit in one fell swoop, but like all gamblers, their desire to constantly make fast money inevitably causes fatal missteps that will ultimately result in financially devastating losses.

Years ago I tried out the gambling day trading strategy. It was during the dot com boom. Yes I made quite a bit from very short term trading bursts, but overall, my losses outnumbered my gains. My short term investing strategy led me to essentially buy high and sell low. My emotions caused me to jump aboard a skyrocketing stock price run when it was actively soaring, and the same emotions caused me to bail quickly but prematurely when prices were actively plummeting. I still regret those fledgling investment days when I was still a naive college student who knew nothing about the stability and wisdom of long term investing. Even if you want to invest in the stock of a riskier company, you should still invest for the long term. In the long run, most stock prices do usually rebound so long as the market sector and the underlying company's financials remain healthy.

Try To Follow Business News Regularly, But Don't Obsess About Changes In Individual Stock Price

The easiest way to avoid trading on emotions and irrational exuberance is to simply stop obsessively and compulsively tracking your portfolio's stock prices every moment of the day. Back when I started stock trading in 1999, I used a fledgling brokerage firm called Datek (company has since been acquired by TD Ameritade). At the time I used their service, the company introduced a revolutionary and neat little online stock price streamer tool that fed my tracking obsession. I used to love sitting in front of my computer screen and watch the green and red ticker numbers cycle up and down hypnotically. Because my trading account was linked to those numbers, I was able to to see how much I was making or losing in paper gains and losses on a real time basis. This real time convenience did nothing but cause me to unnecessarily panic when prices went down, and become irrationally confidant when markets soared, during a period when day-to-day stock market prices were dangerously volatile.

Since then, I've learned that the smartest thing any investor can do is to avoid looking at one's investment portfolio numbers so frequently. It's important to know where your financial portfolio stands, but don't make it a habit of tracking every tick and number change. This has permitted me to become more relaxed and confident in executing trades based on my long term investment strategy. I don't get too bogged down by short term dips anymore as I've weaned the real-time technological temptations out of the investing picture. Once you stop checking your stock prices all the time, you'll be able to invest with more confidence and with a more sound and stable long term horizon.

As always, all well informed investors should make it a habit of following and reading daily business news articles as well as paying attention to current event developments. It's important to know how the markets as a whole are doing and to be aware of which sectors are healthy and which are not. I still track financial statistics, but I pay more attention now to broad market and economic indicators than anything else. I am more concerned about long term market health than individual stock prices and performance on a day to day basis. That's what all prudent investors should learn to do if they truly want to invest and grow their nest egg for the long term. If you are a new investor, you should also stay away from investment message boards and forums. Peer pressure has a way of greatly distorting and messing with one's investment mind.