7 Practical and Emotional Tips For Avoiding "Stock Market Stupidity" in Strong Markets
At the time this article is written, we are currently in a market downturn and pessimism is very high.
However, the market will eventually recover and investors should be prepared to avoid making the emotion-based mistakes that are triggered in strong markets.
Now is the time - well before the hype starts - to look at the vulnerabilities that will confront you as an investor when the bull market returns.
The renowned British investor, Sir John Templeton, said that great markets are born in pessimism, grow stronger on skepticism, and eventually die when investors become euphorically optimistic.
When optimism is especially high, investors become overconfident and expect outlandish returns.
Unfortunately, some disreputable individuals in the investing services industry prey upon investors' hope and greed.
Below, please find some practical and emotional tips for avoiding "Stock Market Stupidity" in strong markets.
Practical and Emotional Tips for Avoiding "Stock Market Stupidity" in Strong Markets 1.
Don't be an overconfident investor.
Competence isn't transferable, and although you may be an excellent engineer, homemaker, bricklayer, or physician, don't be deluded into believing that your ability to make competent decisions in one role will help you make similarly competent decisions as an investor.
2.
Don't trust your instincts: studies show that people are bold when they should be cautious and cautious when they should be bold.
3.
Expect to do the wrong thing at the wrong time: studies show that when people make changes in their portfolios, they sell good-performing securities and retain bad-performing ones, which is exactly the opposite of what they should do.
4.
Employ the "KISS method - Keep It Simple, Stupid" for stock market investing.
Avoid individual stocks in favor of a mutual fund that attempts to match the long-term return of the S&P 500 index.
5.
Consult with a qualified financial professional to provide you with facts and figures to help you develop realistic expectations for long-term, S&P 500 stock market returns.
Any expectations to exceed these returns are likely unrealistic.
6.
Be suspicious of people who tell you that they have a secret to making money in the stock market.
Their real secret is scamming gullible people into believing a secret exists.
7.
Consider contacting a Financial Behavior Coach", a Financial Behavior Consultant" or some other professional who is specially trained to help you manage the emotional factors that impact money decisions.
Don't allow unrealistic expectations to jeopardize your ability to achieve financial security.
However, the market will eventually recover and investors should be prepared to avoid making the emotion-based mistakes that are triggered in strong markets.
Now is the time - well before the hype starts - to look at the vulnerabilities that will confront you as an investor when the bull market returns.
The renowned British investor, Sir John Templeton, said that great markets are born in pessimism, grow stronger on skepticism, and eventually die when investors become euphorically optimistic.
When optimism is especially high, investors become overconfident and expect outlandish returns.
Unfortunately, some disreputable individuals in the investing services industry prey upon investors' hope and greed.
Below, please find some practical and emotional tips for avoiding "Stock Market Stupidity" in strong markets.
Practical and Emotional Tips for Avoiding "Stock Market Stupidity" in Strong Markets 1.
Don't be an overconfident investor.
Competence isn't transferable, and although you may be an excellent engineer, homemaker, bricklayer, or physician, don't be deluded into believing that your ability to make competent decisions in one role will help you make similarly competent decisions as an investor.
2.
Don't trust your instincts: studies show that people are bold when they should be cautious and cautious when they should be bold.
3.
Expect to do the wrong thing at the wrong time: studies show that when people make changes in their portfolios, they sell good-performing securities and retain bad-performing ones, which is exactly the opposite of what they should do.
4.
Employ the "KISS method - Keep It Simple, Stupid" for stock market investing.
Avoid individual stocks in favor of a mutual fund that attempts to match the long-term return of the S&P 500 index.
5.
Consult with a qualified financial professional to provide you with facts and figures to help you develop realistic expectations for long-term, S&P 500 stock market returns.
Any expectations to exceed these returns are likely unrealistic.
6.
Be suspicious of people who tell you that they have a secret to making money in the stock market.
Their real secret is scamming gullible people into believing a secret exists.
7.
Consider contacting a Financial Behavior Coach", a Financial Behavior Consultant" or some other professional who is specially trained to help you manage the emotional factors that impact money decisions.
Don't allow unrealistic expectations to jeopardize your ability to achieve financial security.
