My portfolio is down $15,000 today

Yeah, it happens. For some investors that amount would seem insignificant but for guys like me, it’s a lot of money.

One of the hardest parts of investing is being able to manage the ups and downs. When your portfolio goes up, you feel euphoric. When your portfolio goes down, you feel terrified.

A good way to prevent yourself from getting swallowed by your emotions and doing something stupid like hitting the “Sell” button, you need to have a hypothesis for your investment.

In One Up on Wall Street, Peter Lynch has a chapter on the “2 Minute Drill”. In it he talks about how you should be able to give a quick summary of why you’re invested in a company. The summary should be so simple even a 5-year old could understand it.

Having a hypothesis lets you ignore the fluctuations that inevitably arise when some sort of bad news comes along. In my case, the news that OPEC+ member U.A.E. doesn’t want to limit its oil production to just over 3 million barrels/day has resulted in a 2% drop in the price of oil.

My hypothesis is that even a 10% drop in the price of oil (at this time that would be $67.50) the companies I’m invested in are making a lot of money. As a consequence, I’m not worried that my portfolio has lost $15,000.

If you’re new to investing, I really recommend reading One Up on Wall Street. The 2-Minute Drill chapter is great. If you combine it with Lynch’s 6 categories of stocks, you’ll have a foundation for dealing with one of the hardest parts of investing – managing your emotions.