Being sucessfull in equity markets is all about managing fear and greed. In poor market conditions it is fear of underperformance that drives unprofitable investment decisions. Shohini Nath observes that fear indeed is the root cause that drags the portfolio returns. Read on as she shares 11 healthy investment practices to manage fear profitably.
The markets may act nasty at times which spooks investors for sure. In such nasty times fear creeps in slowly and panic created leads to most investors taking wrong actions. Can we blame this fear on human psychology? If we were to ask someone, which is the biggest fear he/she has when it comes to investing money in the market, the answer is: “It is the fear of losing money”. No one clearly wants to lose even a penny. Studies over the years have suggested that the pain of losing is twice as strong as the joy of winning. It aches more to lose `100 when compared to the happiness of winning the same `100. There are ample reasons that create this illusion of fear in the minds of an investor when the markets do not behave as expected.
Humans are a complicated bunch, but everyone is unique in nature. Similarly, one person’s stimulus to fear would be different from the other. Fear is a personal experience and how we react to it thus depends on our previous experience. As humans, it is not just the experience we have had in the past, but also it could be an experience faced by a friend, a family member or even some story we have read. These are the influences that trigger our fear.
When an investor encounters a sudden correction in the market, the first instinct is to freeze and to wait. During this interval, the brain preps the person to take further action, which is to fight or take flight—either of the two moves decides the fate of the investor's equity portfolio. The end results of fight or flight are drastically different. Fight would help the investors to build requisite defenses, whereas flight would influence them to pack their bags and exit the situation (at a loss or minimum gain). Most of the investors would succumb to fear and lose out on the opportunities that fear prevents them from grabbing. Investors act melodramatic and lock in minor gains to avoid losses.
This story is from the May 27, 2019 edition of Dalal Street Investment Journal.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber ? Sign In
This story is from the May 27, 2019 edition of Dalal Street Investment Journal.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber? Sign In
How To Invest In An Ageing Bull Market
Bull rallies (periods when stock prices rise) and bear declines (periods when stock prices fall) are natural parts of stock market cycles, but they don't follow a fixed timeline.
Should You Entrust All Your Money To A Single AMC?
If you are a market participant, you have probably heard the quote 'don't put all your eggs in one basket', which suggests diversification. Investors often focus on diversifying across categories like large-cap, mid-cap and small-cap, but they may unintentionally overlook diversification across different AMCs. The question arises: is AMC-wise diversification really necessary? Rakesh Deshmukh takes a closer look at this scenario
Wild Swings Engulf Global Equities
U.S. stock markets experienced significant volatility. An early-week rally pushed the markets to new highs, but this momentum faded, primarily due to weaknesses in the tech sector. The major indices had a mixed finish with, S&P 500 and Nasdaq closed lower, while the Dow recorded a notable gain.
U.S. Elections and China's Economy Hamper Commodities
Commodity markets experienced selling pressure in the last fortnight, driven by uncertainties surrounding the upcoming U.S. presidential elections, concerns about the Chinese economy, and increased agricultural production in Brazil.
Wealth Building For Retirement Through Mutual Funds
Retirement is one of the most crucial and lifechanging phases. It marks a period where maintaining your lifestyle becomes paramount even though your regular income stops.
Mastering Investment with Information Ratio
Information Ratio helps in navigating the complexities of the investment landscape by assessing an active fund manager's performance. And though it has its limitations, it remains an essential part of the finance industry. The article explains what Information Ratio is and how investors can use it as another tool
Plan To Be Financially Independent
Each of us aspires to be financially independent as it ensures having enough resources to be self-sufficient and control our finances.
❝Technology is the new game-changer"
With a new breed of young investors entering the financial markets, it is the use of technology that is increasingly playing a major role in how investments are done and tracked. Anand Radhakrishnan, Managing Director, Sundaram Mutual Fund, shares his opinion about how this factor is turning into a significant tool and how it will shape the strategies of his company
What If Donald Trumps?
The potential election of Donald Trump as president in the U.S. carries significant implications for the Indian equity market. It could lead to changes in the global trade dynamics, in particular affecting the Indian IT sector while also raising inflation levels and leading to yet another revision in the visa programme for Indians who want to work in the US. The article takes a closer look at what may lie in store
Sectoral Gains Make A Mark
Benchmark indices continued their uptrend, reaching new record highs, although the pace has slowed as the broader markets faced selling pressures
