Successful investing is a long and slow process. There are plenty of pitfalls to overcome, and there is a lot of noise out there (in the form of content, misleading information, irrelevant information, etc). Although not part of our list of 7 Secrets of Successful Investing we believe there is one really bad habit that is destructive to most investors: mobile apps that allow you to track prices of stocks and other assets. We list 5 reasons why we believe mobile apps tracking (stock) markets and portfolios is pure poison (most of the time).
The daily profit/loss status that is featured on all interfaces of brokers, exchanges and (stock) market tracking apps is one of the most misleading and confusing features. It creates a lot of noise in the head of the investor.
Reason #1: daily P/L status.
One problem with the ‘daily P/L status’ is the mental focus that it creates on day-to-day price changes. Needless to say, this is destructive for the mental state of the investor. It creates a willingness and desire to return every day and look at a ‘good result’, seemingly missing all relevant information related to trend and turning point.
Reason #2: daily P/L status.
Another problem with the ‘daily P/L status’ is the illusion of profit (also loss). Most of the time, the profit and loss situation is unrealized. Why does an unrealized profit make an investor glad, and why does an unrealized profit make an investor sad?
While the problem of point #1 mentioned above is a mental issue, the problem with the P/L status is an emotional issue.
We recommend readers spend some time reading Investing Secrets: How The ‘Investing Triangle’ Can Help You Improve Your Investing Decisions.
Reason #3: green and red color codes.
The classic color code is such a horrible invention: green makes you glad, red makes you sad. It sends emotional signals to the human mind, in a very subtle way, which over time can have an effect on the inner state of the investor.
Better to focus on the charts which feature trends and turning points.
Reason #4: snapshot vs. trend.
Mobile apps typically show a snapshot of price (or a portfolio situation). Focusing on the snapshot distracts you from what really matters: the trend.
Spend more time on analyzing the trend, spend less time on snapshots.
Reason #5: you’ll miss the turning points.
All in all, when combining the above points, you realize that these mobile apps with these classic distracting features create a wrong focus. In the end, all that matters is trends. Equally important, turning points is what investors should be looking for.
When going long all you want is to sit it out as long as possible. You want to know when a bull run is hitting a turning point. When going short all you want is to sit it out as long as possible. You want to know when bearish momentum is hitting a turning point.
