With recreational stock investing, impulsive trading is usually the precise phrase. [1] Sometimes, I feel “infatuation” describes a different perspective.
I have a mild (not extreme) but uncontrolled tendency to become infatuated with some products
- eg blue-chip stocks with BUY recommendation .. If it’s a billion-dollar brand name, with a trec, I tend to brush aside the negative analysis.
- xp (earliest): during my Tritech industrial attachment, I fell in love with some mutual funds and biked all the way to west coast to buy some mutual funds
- xp: Between Year 3 and Year 4 in NUS, commodity trading cost me $11k due to infatuation
- xp Allianz high yield fund — once took up SGD 100k of my fund. I didn’t make a loss but the return was much lower than initially perceived
- xp Saxo FX option trading — I took on too many positions
- xp (biggest) Cambodia GRR rental properties.
It’s easy to get carried away and underestimate the risks, the long wait, the severe liquidity limitation.
— 4 nights after pre-clear.. Most of my trading tend to happen on the first night … more stressful and less efficient than spread-out. Is it rational or should I change?
- factor: better price on first night .. in about half the cases, first night has better (some would say no-worse) price than subsequent nights. See the “Rise” scenario.
- factor: I usually set my own quota. In many cases first night I have used up most of it. This habit can be adjusted.
- .. sugg: set a smaller quota in the beginning.
— Scenario: I spend many minutes selecting stocks, then due diligence on each including a desirable incremental amount, then pre-clear, then set aside nightly hours, but in the end only invest $10 to $20 over 4 nights š
I feel the most common reason is the “rise” scenario.
Another common reason is implementing the desired increment, esp. when I had a pre-existing position, and I use “too many” fractionals.. hard to keep track of the running total.
— Scenario: I often find a stock with positive rating + CDY + stable div history.Ā The more pre-trade effort invested, the more pressure I feel not to waste the effort.Ā I end up tweaking my order and trying to get a fill.
Therefore, the Kun.H style of deep analysis is dangerous for me, esp. when I want to buy dozens of names within a month.
I tend to enter a limit price somewhere low, and wait for hours to get a fill š My new Suggestion .. fractional buy to release the tension. Also reduces the tcost of manual handling (different from babysitting an existing position)
— Scenario: After buying, the stock rises š ……. I had sometimes given in to the urge to top-up at the now higher price, partly due to the pre-trade tcost (a sunk cost).Ā This is an example of infactuation, but more infatuation than impulsive. See [1] above.Ā In hindsight, I think it’s usually better to stand aside. Quite likely the price would fall, and buying that same quantity would be better at the lower price.
Jolt: stand-aside habit interferes with my plan to increase U.S. eq allocation.
Realistic example: I had set out to invest “up to $100 or 2 shares” but have bought only $1 before price went up. The initial tiny purchase tends to but should not dictate what I can/can’t do now. If you feel justified to top-up, then buy fractional please.
— Scenario:Ā After buying, the stock falls š ……. Paradoxically, i often rub my hands in glee, because “I can have more fun buying!” Still, it’s prudent to use fractional buys to release the emotional build-up.
ROTI — tend to become an issue. Beware!