During this past month, we have seen significant moves up and down. Volatility has risen; there have been some scary drops in Asia, and some follow through selling (more or less) in the US.

We have seen small measures of over-reaction, along the lines of “What do I do? What should I do? Should I do nothing, something, anything?”

This is, IMHO, the wrong approach. During periods of market volatility and stress, I like to step back and consider (no pun intended) the big picture. I find it is helpful to understand what is within — and out of — my control.

Indeed, one of the most important things I have learned in my careers as a trader/strategist/investor was recognizing what is in my control and what is not in my control. My experience has been that when I focus on what is in my control and learn to roll with what it is out of my control, every thing else vastly improves.

Consider the following two lists of dozen items — these are what is in and out of your control:

Within My Control
1. Having a long term investing plan
2. Furthering my own education
3. What I watch (or don’t watch) on TV
4. Honoring my own buy & sell disciplines
5. Who I choose to associate with
6. Recognizing the importance of empirical evidence and data
7. The Portfolio Allocation I set up
8. Understanding my own emotions (and emotional state)
9. What I choose to read (and not read), as well as how much reading I do
10. How I structure my business, what I charge for my services, who I hire, etc.
11. Doing something professionally that is deeply satisfying
12. Maintaining my own ethical standards

What I write, say, and do are all obviously under my control as well.

The other list:

Out of My Control
1. What the Fed does
2. GDP
3. How my wetware works
4. Market action, rallies and sell offs
5. Interest Rates
6. Congressional Action
7. The Nature of Humans
8. Corporate Earnings
9. What the major media report on and make front page news
10. Unemployment Rates
11. How my brain is wired
12. Other people’s reactions, overreactions and panic


The conclusion is both obvious and simple: Focus on what you can control; do not stress over what you cannot control.

Investors and traders should endeavor to stay off of the emotional roller coaster, develop an intelligent long term plan, and then execute on that plan.


Things I Don’t Care About (January 15th, 2013)



Update, May 30 2013 7:14pm

Carl sends this scribble along:



Source: Carl Richards, BehaviorGap.com


Category: Investing, Sentiment, Trading

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

6 Responses to “What Do You Control?”

  1. Willy2 says:

    Controling one’s emotions is not so simple. What certainly helps is to have a good understanding of what the drivers are behind movements in the markets. (After all, we’re all human, right ?) Then one can explain what’s going and then one is able to control one’s emotions better and make much better investment/trade decisions.

    Reading and listening to other people’s opinions also has helped me A LOT. Different persons have different opinions. And if/when those opinions diverge, then one should put one’s braincells to work, read even more, to find out what makes sense and what doesn’t.

  2. Blue Guy Red State says:

    Excellent list. Like your mix of inside intel on Wall Street and large doses of practical business savvy.

    ‘Raising’ (quotes because I use the term loosely) six kids between second wife and myself, sent them all these two lists (except the 14 year old, who’s more mercantile than the rest anyway).

    We have two 24 yr olds, one 23 yr old, two 21 yr olds and the 14er. All would benefit from a better understanding of how money and finance work, both in general and in terms of today’s casino world.

    I’m a typical Boomer slouching toward retirement. My great good fortune was to 1) marry a doctor’s daughter whose late father’s frugality let her and her two brothers pay off our house mortgages last year, and 2) land a tech job (I’m a Mac guy – sales, service and repair for over a decade plus over 25 years of professional Mac use in printing, publishing etc.) at a large state university (Big Ed) where the benefits more than make up for 40 plus years of private sector work.

    Keep the good advice coming! Us proles need every scrap of it and then some.

  3. [...] Focus on what you control, ignore what you cannot.  (Big Picture) [...]

  4. capitalistic says:

    Nice post. This is the premise of behavioral economics/finance. Focus on what you can control. Just because credit is cheap (and companies are overvalued) doesn’t mean I need to go on a shopping spree. Projecting rates, volatility, public policy, energy prices, etc, is a futile attempt.

    It’s like blackjack: play the cards you’re dealt.

  5. [...] What Do You Control? - great reminder, do this and know your limitations. [...]

  6. [...] What Do You Control?  (May 30th, 2013) [...]