Human sentiment and market volatility

Gaining more conviction, how?

It is very important to come to your own conclusion. For example, if you did analysis of, say, some FMCG company and came to the conclusion that this company has a great strategy and will continue to grow at 15 per cent for the next few decades; that is the safest, brilliant and a highly rewarding investment avenue that you have discovered. So then why fear putting more than 25 per cent of your money right into this? This way, in about 5-10 years time you would have converted your stock investment into a tax-free fixed deposit via dividends and capital appreciation. But all this comes out of knowledge and research which comes by investing in your own self i.e. investing in learning and building investment skills.

Human behaviour

The greatest fear for most of us is not being able to trust ourself. We are our greatest enemy and not the stock market. Do not sell when you see a good investment is down by 20 or 30 per cnet. Don't panic. Understand it is momentary and not perpetual. If you see prices going down, it's a time to buy and not to fear and eject out of the investment.' We pretty much know this but seldom implement it. You also know that if you sold earlier, you are probably still waiting to re-enter and will always keep waiting to re-enter. Likewise, if you sold at a 20-30 per cent profit, you are potential losing out the multipliers of future and hitting your head for the moment. Sell or switch from one investment to another when you have a better idea of what to do with the money on hand. Having fear is understandable but irrational behaviour happens due to lack of knowledge. Naturally this needs to be plugged.

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