I have a problem.
No, not that one. Not the other one either.
Yes, I have that problem, but that's not the one I'm talking about.
My problem is this: my shares have gone up.
Now, before you jump to conclusions, I'm not complaining that, on paper, I'm a little better off than I used to be.
I'm not some out of touch property mogul saying the quiet bits out loud.
I live in a modest home, and drive a second-hand Hilux. I'm not complaining about not having room for more caviar and Bollinger.
(Truth be told, even if I was a gazillionaire, you couldn't offer me enough money to drink champagne, but that's a whole different story.)
And no, I'm not complaining about making too much money and having too much tax to pay.
I'm definitely in the 'The higher my tax bill, the more money I will have made, so bring it on!' camp.
Instead, the problem with my shares having gone up in price, recently, is that I'm still building my portfolio.
And so, while it's nice to feel richer, and more comfortable when the market 'validates' my choices, higher prices make me worse off.
How?
Because I want to keep buying shares. Probably for a couple of decades, if the good lord is willing and the creeks don't rise.
And if that's the case, I'd much prefer lower prices, now, and higher prices later.
Which… isn't what most people think they want.
I'm obviously aware that many of my readers are already retired, and kinda like higher prices so they can sell fewer shares to generate a given level of income.
So I'm not saying lower share prices suit everyone.
(You'll also not be surprised to hear that I have no special powers to actually influence such an outcome in either direction, so if you're in that boat, you have nothing to fear.)
Of course, wishing for higher or lower share prices is pretty futile. As the old saying goes, if wishes were horses, beggars would ride.
But I raise it to remind you of how I – and I think you should – think about share prices.
Humans are deeply social creatures. We crave acceptance, and we like to fit in. We look to others for approval and reassurance.
As I've said before, perhaps the best definition of a successful investor is 'a person who can successfully overcome the evolutionary urges that seek to derail long term wealth creation'.
In this case, that plays out as our ability to think about share prices independently of the emotions of others… or ourselves.
Lower prices usually come with predictions of doom. They come with widespread disinterest, as I wrote yesterday. They come often with feelings of emotional pain and regret. They make us want to avoid the thing that caused that pain in the first place (i.e. investing). They make us feel like failures, as we consider how much money we've 'lost'.
Those feelings are 100% natural. Our brains simply didn't evolve to easily let us separate those things from the longer term story.
What worked for us on the savannah works against us as investors.
But that, dear reader, is our task.
Think of any successful business today. Wouldn't you have liked to buy those shares at a cheaper price?
Like, say, Woolworths Group Ltd (ASX: WOW) during the COVID crash, when they fell from $36 to $29? (They're now $38.)
Like, say, Cochlear Limited (ASX: COH) in 2011 when there was a product recall and shares fell from $83 to $46 (they're now $260)?
Like, say, BHP Group Ltd (ASX: BHP), which dropped from $35 to $15 between 2014 and 2016, only to be trading today at $45?
Have I cherry-picked these? Sort of. But also, which of those three businesses, even at those times, was facing ruin, or permanent long-term damage.
Even without the benefit of hindsight, it would have been a brave person to have seen those price falls and assume the end was nigh.
And yet, at the time, too few people bought those shares, because the short-term past (and probably some concurrent doom-and-gloom predictions) scared them away.
Now, I didn't buy any of those businesses either. Gotcha? Not really, I deliberately chose companies whose shares I don't own, to avoid appearing like I'm talking my book, or taking a victory lap.
I did buy shares of other businesses at those (and other times), though.
Not because I loved the feeling of losing money. Not because I relished the idea that prices might fall further.
I haven't overcome those evolutionary impulses we all share.
What I have been able to do, though, is quarantine that part of my brain from the part that knows it should invest anyway.
So, when prices fall, I invest.
Sometimes, it's uncomfortable.
Sometimes, I downright hate it.
But, I do it. Because I know it's the right thing to do.
If I could truly turn off the 'fear' part of my brain, I'd probably be a sociopath. So, overall, I'm happy to know that I still worry when prices fall!
The trick, for me and for you, is to ground ourselves in one part history (things tend to get better, for quality businesses and the market, overall), one part logic ('this too shall pass'), and one part preparation (when prices fall, I'm going to grit my teeth, gird my loins, and buy anyway).
Easy? No.
Easier, over time? In my experience, yes.
But it's important, because that's when the best opportunities will be available.
Let me finish with this, though, too: not only is it important to keep buying, but it's just as important (perhaps more so) not to get panicked into selling right at the worst time.
A course of action that prompts us to buy will not only hopefully see us buy at better prices, but it's a mental and emotional protection against being tempted to sell, too.
Bottom line: We can't always control our emotions, but we can control our actions. And having mentally prepared for those times leaves us far, far more likely to make good choices.
Now, if you'll excuse me, I have those other problems to attend to…
Fool on!
