Buy and hold only works if you do both when markets crash. It's much easier to both buy and hold when markets are rising" - Ben Carlson.
It is always easier said than done, investing like all other human endeavors is driven by emotions. Efficient management of emotions is not everybody's game, hence only a very few individuals end up making money when investing. However with guidance and practice we all can develop this skill.
The Investor Sentiment Wheel
Investing process is mainly driven by Greed and Fear. Investors go through varying degrees of greed and fear during fluctuating market conditions.
The following chart comprehensively sums up the emotions or the sentiments an investor goes through a market cycle;
Traits of a Prudent Investor
A prudent investor over a period of time learns to master these emotions, and stick to the basics, to make his money work for him harder and longer.
He does not follow the herd mentality. He neither panics when the markets go south nor is he euphoric when the markets peak.
He usually has a set plan and a long term perspective. He sticks to his plan, while making small and necessary corrections according to the market conditions.
Test of Temperament and Patience
Investment is very similar to Test Cricket. It not only tests your technique, but it also tests your temperament and patience.
To be a successful test cricketer, a batsman has to have a detailed plan, right technique and lots of patience. One rash shot may cost him his innings.
Likewise, an investor has to learn to keep his calm, stick to his plan, and not be fazed by what is happening around him; just like they say....
What about you?
Have you invested in stocks or Mutual Funds?
Do you experience similar sentiments while investing? What is your usual response to a stock market crash? Do you Panic? Or are you unperturbed?
I'd like to hear from you...
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Expert Advice and Free Consultation
As an Independent Financial Advisor with more than 15 years of experience, I can help you set up a Holistic Financial Plan, based on which we can select suitable investments to help you achieve your goals.
I will also help you manage your investment on regular basis, to make sure you avoid knee jerk reaction and stick to the original plan.