News and investing - Stop zugzwang-ing yourself


I learnt a very interesting word today - Zugzwang.

It is German for "compulsion to move".

It is usually used to denote an unfavourable situation in games like Chess where for the game to go on, you have to make a move on your turn, even if it makes you worse off i.e. you can't simply pass your turn even if you want to/should.

What does this have to do with stock markets and investing?

A lot.

There are so many investors who zugzwang themselves while investing in the stock market.

They feel compelled to make a move every now and then.

Some news comes out and they feel like they need to act - change their SIPs or their Mutual Funds, increase or decrease their investment and what not.

Stock markets are not a game of chess. You can pass.

Not only you can pass, you should pass. More often than not, this will be a better strategy.

Here is a confession - as an expert who should know how to decode every breath the market takes and invest accordingly - I usually do nothing.

I did nothing when the new government got elected.

I did nothing when Brexit happened.

I did nothing when demonetisation happened.

I did nothing when GST happened.

It's not like I don't have opinions on these events. I do but I also know that I am more likely to hurt myself by acting based on my in-the-thick-of-the-moment predictions.

I did not change anything when the market went down and I am changing nothing when it is making new highs.

I haven't skipped or stopped my SIPs based on any economic news or stock market gyrations for years now.

I would rather stick to a tried-and-tested strategy.

If I feel something works better, I would test it and if it works add it to the strategy itself, instead of over-riding it at every news.

So next time, when you feel like making a move, just remember that you can pass. :)