Investing is not about numbers

Few investors realize that investing is not a numbers game. Making buy-and-sell decisions based solely on price movements is a strong indication you are outside your comfort zone. Buy at 5 and sell at 10 or buy at 10 and sell at 5 is trouble both financially and emotionally. Buy-and-sell decisions need to be made on the basis of knowledge of who you are as an investor, a fundamental understanding of the investment, and a determination of whether the underlying fundamentals of the investment meet your investment needs. If a company or mutual fund is having a bad quarter or a bad year or a great quarter or a great year, you need to understand how it is reacting to that situation and if its reaction indicates that it fits your investment needs. Price movements are external factors that tell you little about the company, the mutual fund, or yourself.
An emotionally mature adult would not make personal relationship decisions based solely on external factors. If you are in a new romantic relationship and your lover’s mother suddenly dies, do you end the relationship immediately (sell) or watch how your lover reacts to the loss of a mother and watch how you react to your lover’s loss. If your lover then inherits half a million dollars, do you make a decision to marry (buy) or do you watch how your lover reacts to new wealth and how you react to your lover’s financial gain. In a romantic relationship, your goal is to build a long-term positive relationship. Breaking up or staying together based on external factors such as a death or inheritance is clearly immature. The internal factors, your lover’s emotional development and your own, are the real basis for judging the long-term potential for marriage or a parting. The internal factors, your emotional makeup and investment policy, and the company’s reaction to success or failure, are the real basis to determine buy-and-sell decisions.
Investing outside the comfort zone is exemplified by basing trading decisions solely on price. Other external factors also influence investors when they are outside their comfort zone.