Loneliness as is defined in modern day is a complex and unpleasant emotional response to isolation. It includes anxious feelings about a lack of connection or communication with other beings, both in the present and extending into the future. – Wikipedia
Our society today is plagued with loneliness. It’s prevalence knows no boundaries. Rich, poor, married, not married, veterans, young, old, etc. all suffer when their network of social connections is deficient in some way. In a world where being always connected has never been easier, deep connections rich with substance are increasingly difficult to come by. Some academic circles have termed the sad reality of modern life The Loneliness Epidemic. Just below is a recent New York Times Article discussing the physical risks of chronic loneliness and how profound the effects can be on lifespan.
It’s well known that as human beings, we have psychological needs that are every bit as important as physical needs. Quality friendships, having family and friends we can confide in and feeling like we are a part of a greater whole are akin to physical necessities. This is all for very good reason. As we evolved, if you became separated from the tribe you were depressed and lonely as you were in danger of great harm. Our fundamental desire for a sense of belonging is a part the human blueprint, and it won’t be going away.
This built in blueprint once counted on for survival intelligence, hinders us when it comes to investing. In my opinion, it is the number one reason that almost no one can beat the market indexes on any long term consistent basis, as well as the reason nearly everyone fails when trying their hand at being a trader. Obviously their are other factors that come into play, but none as complicated to solve as this. Our innate ability to survive by joining the crowd for safety, works directly against us as traders and investors.
Ray Dalio, founder of Bridgewater Associates one of the largest hedge funds in the world famously says that “to make money in the markets, you have to think independently and be humble.”
Warren Buffet, chairman and CEO of Berkshire Hathaway quotes that “we simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”
John D. Rockefeller, the world’s richest man in the late 1800’s said “the way to make money is to buy when blood is running in the streets.”
Benjamin Graham adds that “to succeed one should buy not on optimism but on arithmetic.”
Countless other famous and successful investors put forth that joining the crowd when it comes to investing is a surefire way to lose money and ultimately fail. This behavior going almost directly against the aforementioned blueprint of being with the crowd for survival.
When we see a stock making a big move higher, we want to join the crowd, be part of the action and have that sense of belonging. Anyone (everyone) who has bought a stock after a huge upward move has already occurred has found themselves in the uncomfortable predicament of being underwater on the position almost instantly. It took me a long damn time to retrain my mind to not buy big moves up. I had to lose my own money, my friend’s money, and more of my own money before I got it. I didn’t want to be out in the cold, lonely knowing I wasn’t a part of a big stock rally. So I joined the crowd, bought in late at higher prices and alleviated the loneliness. By doing so I alleviated my account from having any money left too.
Joining the crowd almost without fail, leads to investing ruin. Those in the financial circles know the terms FOMO or FIMO.
Fear of Missing Out.
Fuck, I missed out.
It’s a powerful feeling that as a participant in markets we fight with every single day, even when we know better. Even when we’ve made this game our passion and obsession for a decade. Shaking that lonely feeling is going against the very thing that kept us safe and alive so it’s an insurmountable task to overcome. Even the most disciplined trader isn’t safe from this most powerful feeling.
I don’t think that we ever get to the point where it feels good to jump out on our own, and stake a claim to a stock or asset class that no one is interested in. It means being lonely, separated from the pack and having a feeling of isolation. No matter if we understand that the path to profits is to be contrarian, it won’t sit right with us. It’s not supposed to. We weren’t designed to be creatures comfortable in isolation.
The best we can hope for, I believe is to learn to get comfortable being uncomfortable. I like to joke that my best trades come from the ones I feel sick when putting them on. I feel sick and alone. When I feel sick and alone I do my best trading and investing. That is when lonely old me profits the most.
Pardon me, but I am off in search of loneliness.
OC