The awareness of opportunity can become pathological. With limited capital, you must pass over innumerable buying opportunities and commit to only a few. Cash, waiting to be invested, can feel like burning sulfur in your pocket; it wants to be spent.
When the markets are bullish, perhaps the desire to spend one’s cash diminishes. You are then aware of lost opportunity, but this is easily overshadowed by the growth in valuation of your holdings.
But when the bears hold sway, and ‘market corrections’ reframe stocks that you previously considered expensive, those sulfurous monetary fumes quickly reach your nose and that insidious desire to buy soon asserts itself.
Let’s discuss the pathology, then. Learning to buy requires, firstly, a sense of the market’s opportunities in relation to each other: understanding how they are grounded, and how they are different. This takes some time. But once you’ve developed a filter for quality (of varying degrees of rigour), you will begin to see things that you like, and not just for purely aesthetic reasons. No – you will be convinced that something is valuable, or will be, and it’s only a matter of time before the market recognises it. The more you research the financial markets, the more potential purchases will reveal themselves, and you develop a sense for differentiation and ordering of opportunity.
Assuming you have capital available (scarce, for most mortals), then the awareness of opportunity in the market becomes a prompt: if you have conviction about X being a good investment, and in relative terms it is well priced — then get out there and allocate that capital, the ill-disciplined mind will yell at you! Yet irrespective of any ill-discipline, recognition of the fact that opportunities, plural, exist – this prevents you from buying impulsively; rational self-interest applies the breaks (but not the hand-brake). The varying opportunity costs are then felt, internalised, and that sulfurous impulse becomes more nuanced – but still there.
Well, you inevitably make the purchases, with a steeling of the nerves and (un)spoken “this is it!” Assuming that this incurs platform fees for trading (as it does on most wealth management platforms e.g. Hargreaves Lansdown), you don’t buy just for the thrill: you buy to hold for a significant period of time. You’ve now committed your cash into an asset far less liquid, less changeable. And, with each purchase, there is less sulfur in your pocket, less impulse to buy – the fact of a decreasing cash pile dims your pathological awareness of opportunity – and gloriously so.
For some, they can leave cash alone while learning to buy, recognising perhaps that sometimes holding onto cash is itself an investment: those are the lucky ones, or perhaps the disciplined ones. For others, like myself, I needed to use it all up. The awareness of potential opportunities gnawed at my attention and ruined my concentration. So, to escape the distraction, I bought my so-called opportunities.
This is learning to buy: the prerequisite for learning to sell. After you get to see just how close or (more likely) far your ideas of opportunity were, compared with longer-term reality… then learning to sell can begin.