A Test Of The Emergency Disappointment System

This morning I checked on my stock holdings only to discover that Biogen (BIIB) had dropped 25% from yesterday's closing price. Evidently their Multiple Sclerosis drug Tysabri has been found to possibly cause a deadly side effect. There was only one thing to do: sell my position and sell it quickly. Within one minute I had opened a browser window, logged in to my online trading account, and executed the sell order. When the trade cleared, I had lost 26% overall of the money I had spent on this stock.

A few years ago, I would have reacted to a development like this with anger, blame, and lowered self-confidence. I might have felt paralyzed, leading to hesitation about what to do. Yet today, I didn't feel any of these things. On the contrary I was serenely aware that the capacity for stocks to dramatically rise or fall in price is exactly the dynamic that attracts me to trading. It's merely the other side of the same coin that netted me a 25% gain in a short period of time from the market's recent downtrend. (using ultrashort exchange traded funds for real estate and technology)

It certainly helps that I didn't have all my investment eggs in this basket. By the way, I'm not a big believer is diversification as it is commonly practiced. (or "de-worse-ification" as some pundits put it) That can lead to a scattering of focus, especially for the individual investor who has other things to do with his time than keep an eye on the market all day long. I follow William O'Neil's system (outlined in his classic book,How To Make Money In Stocks) which suggests buying a few of the very best growth stocks when the market in general is moving up. (using his rules, it was a judgment call as to whether the stock market had turned around to start heading upward again in the past week - which is when I purchased Biogen)

What happened in my stock account today was only a test. As is everything that ever happens in life. I don't expect to win them all anymore. In fact, it's the building of a foundation of increasingly more enlightened responses to these kinds of events that really matters to me now.