This week has been quite an eye-opener for me as an investor, especially as one operating out of Turkey. As we all know, the FED recently raised US interest rates to the highest level in 22 years. As a Turkish investor, I naturally assumed that this move would trigger a decrease in the Turkish Stock Market (BIST). Though I’m still gaining experience in the world of finance, I thought this expectation was a fairly standard one. However, as it turned out, BIST not only stood strong but increased. Some investors even managed to achieve a profit margin of 40%-50%.
This scenario made me question my investing strategy, as I had pivoted my focus from BIST to NASDAQ. So, I wondered, should I regret my decision? In the rest of this blog, I aim to share the reasons behind my strategic transition.
Statistical Reasons for Transition
My journey as an investor began on December 20, 2022, when I made my first investment at the peak of the market. I took the leap based on a friend’s recommendation. However, within just a month, I experienced a 30% loss. Despite this setback, I remained patient and continued to make regular investments, hoping for the market to rebound.
During this time, I notice that had I invested in the US dollar instead of Turkish companies, I could have reaped better returns. I understand that the period was particularly challenging for many Turkish investors due to a series of unfortunate events like an earthquake, elections, and so forth.
Upon reading the USD/TL target price, I contemplated whether I should pivot my investments based on dollars. The logic seemed quite compelling. For instance, even if the stock increased by 10% and the currency by 30%, the cumulative effect would be a 43% return (1.10 * 1.30 = 1.43).
Continuing from where I left off, the reasoning behind my pivot to dollar-based investments was influenced by the prevailing financial trends during my initial investment phase. It was during this period that we observed a whopping 44% surge in the USD/TL exchange rate. In stark contrast, the BIST dipped by 7.85%, when evaluated in terms of dollar currency.
The decision to invest in Turkish companies as opposed to American ones essentially indicates an investor’s belief that Turkey’s economic condition is more robust than that of the USA. However, as an investor, my primary obligation is towards my financial portfolio. I am primarily focused on protecting and augmenting my investment. In the end, we have to remember that It’s not personal, it’s strictly businnes. ~Micheal Corleone 😂
As I pen down my experiences and the insights I gained, I have realized one key aspect of investing: the world of finance is a continuously evolving landscape. Decisions made today may not yield the expected results tomorrow, and it’s okay. The idea is to learn, adapt, and grow.
After all, regret in investments isn’t about the choices we made, it’s about the lessons we failed to learn from them.
As we approach the conclusion of this blog, there’s a final topic I’d like to delve into — the phenomenon of regret in the realm of investments. The question arises, why do we feel regret? After all, it’s universally understood that we don’t have a crystal ball to predict future market movements. Oh, the luxury it would be if we could! The ability to buy any stock and see it skyrocket by a million percent in a year would be nothing short of miraculous. But, we are not blessed with such foresight.
Interestingly, we often trick ourselves into believing we are. This illusion is referred to as Hindsight Bias. This cognitive bias leads us to convince ourselves post-event that we had foreseen or predicted the outcome, although we had no real prior knowledge. We create an artificial connection between what we previously said or thought and what eventually happened, affirming to ourselves, “I knew it would happen.”
Of course, this blog post could delve deeper into the intricate dynamics of investor behavior and the psychology of regret. In the future, we might explore these concepts further and conduct a more detailed study on regret and investor behavior.
In conclusion, I wish you all a wonderful day.
Happy investing!
AEÇ
