We all witnessed what happened last year and it was nothing we would like once again. The saying, “once is enough, twice is too much” holds very true to the stock market crash in the US as well as the Philippines.
The cycle of investing emotions is a very interesting diagram. It presents a roller-coaster scenario of our emotions and this held true. Imagine if I had sold at the Point of Maximum Risk and bought a the Point of Maximum Opportunity, I’d be retiring in Bahamas by now.
But unfortunately, I didn’t know and neither could have anybody. Even if there were some gurus that proclaimed what catastrophe we would all be facing, I doubt they were heed upon. The human emotions on this matter are just too overwhelming even for our own sake.
In investing, managing the risk utmost priority. Yes, rising stock prices (or NAVPS) elicit elation and excitement. Who wouldn’t? I still clearly remember 2007 when my mom and I greet each other by asking how the stock market performed that day. Those were the days…
But then suddenly, everything just went on a falling spree and the point at which everyone should have sold, suddenly found themselves buying more, myself included. And now the tides have turned and investors were left gasping. It’s true, at the beginning it is just anxiety, denial, then the fear turns to panic, depression and despondency. Eventually, when everything seemed to be going nowhere, stock prices suddenly goes jumping and again similar to this year.
The rally is quite impressive-33% in less than 6 months. The question in everyone’s mind if this is just a dead cat bouncing, bear market rally or a serious bull contender (we use lots of animal metaphors).
Your guess is as good as mine but rather than speculating whether the rally has enough gas or not, it is better to muster our own emotions (read The 7 Deadly Sins of Financial Planning). The worst investors always buy at the peak and sell at the trough and that’s why they are called the worst.
The best heed the wise advice of the Oracle of Omaha, Be greedy when the others are fearful and be fearful when others are greedy. Question is, did we or are we regretting at this point why we did not do some shopping last month or we did not listen to the advice of our financial advisors?
But before you jump in once again, remember to control your emotions. Use your logic instead for this one and you just might come out on top.
http://thewealthwarrior.net
THANKS TO KENDRICK CHUA
.jpg)
Posts
