Market Volatility and Investor Behaviours.

Markets are still bouncing around (or at least falling anyway), and there is still lots of information to digest. Amongst the news and official statistics there are numerous company trading statements (both here and in the US) and an absolute avalanche of speculation to sift through. Is it really any wonder that the market feels more exposed and volatile at the moment?
What has this done to my investments? Well, taking a quick look at the value of my portfolio as indicated by the Merchant Adventurer's index (see earlier post and link to 2010 Virtual Portfolio Performance!), it has dipped since the turn of the year and by a greater amount than the FTSE.

At 11:30am
Merchant Adventurers Index @ 1207.33, -56.87 (-4.5% 2011 Year to date)
FTSE 100 @ 5890.06, -80.95 (-1.36% 2011 Ytd)

This is reflective of the more concentrated number of holdings, and uneven weightings in my portfolio, which exposes it to short term news flow and greater volatility (I am thinking R-R, National Grid, IG Group). But, the same should be true when positive news is released (company or industry specific) so I am not concerned. 

The self-awareness that I am trying to enhance is the ability to filter out the short term day to day swings of opinion and remain focused on the long term. 
My hope is that this will reduce the temptation to over trade and react to the short term views of the volume hungry brokers and bankers of the investment industry. This should reduce my portfolio's expenses and give me a better chance of holding on to successful investments.

I have to hold my hand up and admit that I have, on occasion been sucked into this. In the majority of instances following short term broker fads has had me following the herd which is usually too late to buy in to a story and then lingering too long and getting singed (much like a pyramid scheme, I guess). 
The weakness in following the herd is the assumption that others know more than yourself which can blind you as to the validity of your decisions and any credible information that you may have. Taking a lesson from popular myth, lemmings also blindly follow a lead and we all know how that one ends.
I have had some short term trading success though, but usually this has come when following my own valuations and guidance rather than others.

On a second point, as a private investor, despite using valuations, I am not always able to set a buy price for a share and stick to it. In the majority of instances, if the share price falls to my target price I then doubt myself and look for reasons not to buy, fearful that I have missed something or that the facts have changed. Usually, this is irrational and still built upon a fear that others may know more than me. 
It may be that the share price dips a little more, and psychologically I initially lose a little value, but normally these losses are once again driven by short term sentiment rather than long term fundamentals. 
So, to that end, another behaviour I am trying to promote is to try to restrict my buying to when the market is dipping or "being greedy when others are fearful" as Warren Buffett would quote it. The inverse of that is to "be fearful when others are greedy". 
This in my own small way is an attempt to change my behaviours and go against the herd. So, after 2 days of market falls, I am now checking my watch list for any buying opportunities with Tesco and IG Group standing out as the most interesting given the poor reception to recent results.