Sunday, August 07, 2005

Investing as a hobby 5 comments

(P.S: Sorry for any disturbances the advertisements above may have caused you)
Many people see investing as a hobby which they are happy to read up on and put in some of their money. It is a healthy diversion from the normal routine of everyday work, and of course it provides an alternative stream of income if things go well.

To hell with this mentality. It tends to lead to over-indulgence and ultimately things could go the way of most hobbies --- a whole lot of enjoyment through the process but no financial rewards to show for it.

Let me explain what I mean by over-indulgence. A useful metaphor is how a mother treats her precious child. Whatever he does is seen through rose-tinted lenses, even when it is abhorred by people around (such as bawling on public transport); the result is that he is spoilt by his mother. If one does not critically appraise his current stock portfolio constantly, he is likely to end up with several spoilt apples in his basket as well, unless he is an expert stockpicker and/or is very lucky. For those who do not see investing as a business with risks that must be mitigated, but rather as a hobby that they try to enjoy, I believe they are placing additional psychological barriers against trimming non-performing stocks, because by selling and realising the loss their original judgment will be shown to be wrong and somehow this will diminish their enjoyment of the investing process (nobody likes the feeling of being shown down). So they hold on in hope until it is too late.

Viewing investing as a hobby also has the effect of devoting too much effort to it, with the consequence that one loses focus and a sense of priority. What I mean is, one might lose perspective of the key focal points in the investment process (such as stock selection, monitoring, making trading decisions) and haphazardly read up on anything under the sun concerned with investing, for the sake of indulging in the hobby. Losing focus is a underestimated problem; energy is dissipated in aimless pursuit in the absence of a general plan that inculcates more mental discipline.

Ideally one should be able to concentrate on investing as a full-time business. However, the necessities of life mean that one can only allocate a portion of one's time and energies to it. No matter whether it is part-time or full-time, the importance of adopting a calm and professional approach to it cannot be overstated. In fact, I would think that being emotionless about the investing process is preferable to approaching it with enjoyment.




Anonymous Anonymous said...

GREAT article! I agree. I am a only less than 2 weeks old and already I find myself getting very addicted to checking prices every morning. Today I was thinking to myself, hey.. I am so stressed about it already. THIS IS NOT ENJOYABLE AT ALL! (THOUGH THE THOUGHT OF MONEY DOES GETS YOUR GOING AGAIN!) I love your blog! Great stuff!

8/13/2005 6:04 AM  
Blogger DanielXX said...

Hi Ruth,

My hobby is now writing about investing (through my blogs), rather than investing per se, so in a way it has allowed me to detach my emotions further from the investing process. It's great to know that readers like you enjoy my mumblings :-)

8/13/2005 6:29 AM  
Anonymous Patrick said...

Just written a big message to thank you sharing for your investing advice but it disappeared into the ether as I clicked Submit so here's a summarised version!...

I've been investing in high street banks for years but seeing little return even in ISAs and with a bit of time on my hands, I'm very tempted to start up investing as a hobby so reading these posts has been inspiring!

I've looked into online trading a bit and this site looks pretty good... here's a link to it:

...has anyone else tried it or something similar? - seems to claim to have some good results for the investing hobbyist or on a bigger scale too!

Thanks again for sharing your thoughts!

12/15/2012 1:53 PM  
Anonymous Anonymous said...

If your lucky enough to find something that you enjoy and can make money doing it, then why not - provided it is legal.

Approaching investing as a hobby is a great strategy. Hobbies understand there is an upside and a downside to the every adventure; they understand there is risk. For example, the hobbyist that climbs mountains, understands that they may not make it to the top of Mt. Rushmore. They understand there are health risk, but they try and they prepare for the task. They study and learn. And most importantly they enjoy the adventure. Remember a journey begins with a single step and no two journeys are the same.

3/24/2013 5:45 AM  

Sounds like a great hobby.

1/14/2014 10:13 AM  

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