Take a Break from the Stock Market

One of the more important option trading lessons I've learned is the occasional need to take a break from the stock market.

This realization was borne out for me personally during the insanely volatile market of October 2008 when I spent a week out of state attending a wedding and visiting family.

During that time, I was out of my regular routine and had reduced access to the internet in general, and up to the minute market information specifically.

It was a wild week. Among other things, it was the week when the Dow made its first ever 1000 point intraday swing.

I wasn't completely cut off, however. I managed to catch the headlines here and there and knew about that thousand point swing (as well as that yawning abyss toward which the entire financial infrastructure of American Capitalism seemed to be heading).

And, in the interest of full disclosure, I was still involved enough to roll out a very small short put position with an October expiration to January for an additional (and just as small) credit.

But the important thing to note was that I was definitely out of my market saturation routine and that I followed daily Wall Street events - even these momentous events - with much less intensity than I normally would.

And what did I miss during my AWOL week while the market was thrashing about and in the throes of once in a generation (I hope) levels of volatility?

Pretty much nothing, it turns out.

Part of the reason why the daily churn had little real impact on me was due to the longer term, investing-oriented option trades I employ, which I group under the category I call Leveraged Investing.

That's not to say that my portfolio was immune from experiencing some very real strain, but because I did choose these longer term investing strategies over short term speculative trading, and because I didn't over leverage my positions, I was in a fairly decent (or relatively so) long term position.

All that was required of me in the short term was patience and the determination to ride out a Category 5 hurricane.

But this piece isn't about the advantages of Leveraged Investing strategies during bear markets.

It's about the advantages experienced when you periodically take a break from the stock market.

The Advantages of a Vacation

So what exactly are the advantages of taking a break from the stock market? Well, here are three:

Advantage #1 - When you take a break from the stock market, you get out of the way of your own investments.

It's important to recall from time to time (actually, it would be better if you could have this beaten into you) that your investments are supposed to be working for you and not the other way around.

Although Leveraged Investing is not simply buy and hold and never check, it is about intelligent long term investing. As such, it does require minimal monitoring, but the emphasis is definitely on the minimal.

Constant monitoring, in contrast, not only requires time and energy, but it's also frequently counterproductive. The more you monitor your investments, the more likely you are to micromanage them. And that means trading unnecessarily, unwisely, and too often.

It's when you return from a vacation, or some other self-imposed break, that you realize in hindsight just how little a well-considered investment requires once you've set it up.

Advantage #2 - When you take a break from the stock market, you liberate yourself from your stale routine.

The great benefit of taking a break is that it disconnects you from your regular frenetic routine.

What's that? You say you like your regular frenetic routine?

Fair enough. I'm not advocating permanent retirement or a life of non-involvement. But there is a gift you discover when you break out of a long term routine, namely the gift of actually feeling and being alive.

A vacation, literal or symbolic, underscores the realization that the gift of feeling and being alive has little to do with your investment goals or your financial success.

As the cliche says, the best things in life are free.

The best things in life are also quite simple: a cool evening stroll against the backdrop of a beautiful sunset, a long conversation with an old friend, curling up with a good book or discovering a new musician or rediscovering an old poet, anything for that matter that slows you down long enough to allow your soul to take a deep breath and just enjoy the simple act of being.

Advantage #3 - When you take a break from the stock market, you break out of a limited mindset.

By definition, active investors and traders are deliberately engaged in the attempt to increase their net worth. Don't worry. I'm not about to repeat any of those tired and irrelevant adages of money (or the love of it) being the root of evil or that money can't buy happiness.

But I would urge you to be careful not to fall into the trap that says personal power or security or freedom (or whatever it is that money represents to you) can be derived only through the accumulation of money.

Always remember, it's not your money that defines you or empowers you. It's the other way around. Money is the effect, not the cause.

Take More Vacations

In closing, let me just say one last thing.

We frequently return from vacations with a different perspective and the impulse to implement changes in our regular lives. Those change are typically short-lived. That's not a failure on our part or a deficiency of character, but rather an indication that we simply need more vacations and breaks.

Because, in the end, if we're spending most of our waking hours following every squiggle on every stock chart and every rumor on Wall Street, it can be difficult to remember that our real strength grows out of our inborn qualities and our unique nature.

So take a break. And remember - even with those 1000 point intraday swings in the Dow - the stock market will still be here when you get back.

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