Investment Behaviour

When it comes to our own hard-earned money, it is difficult not to be emotional about investing it. We can easily become irrational in face of vagaries of the markets. So it is between greed and fear that we toggle.

Worry is to be expected too. I worry that I may have sold out too soon and the stock price rises. Some examples were selling DBS and SIA too soon. I worry that I may buy a stock and then the stock price declines. Some examples were OSIM International and SATS. This is despite that I have done due analysis of these stocks.

Impatience is the other behaviour. When market is moving (either up or down) there is this itch to get into action. To be able to wait out and take no action can be difficult. The rational part of me told me to stick to the strategy decided on and wait out. But no, the transaction must simply be done.

These types of investment behaviour go round and round so long when you are in the market and it involves your own money.

One advice is to get on with your life once a deal is done. Do not brood over the decision made. If you have made a loss, so it is a loss. If you make a gain, do not get carried away and hope for similar performance.

Another is for one to reduce investment risk such as invest in a portfolio of assets that are not positively correlated with each other. One asset category is down but the other asset category is up. This is a balanced approach to investing.

To reduce anxieties, think long term for investments. Can you hold on to the investments long term? If one is a very short-term investor (e.g. trading on borrowed funds), this period of volatility can be damaging to one’s mental well being. Caution is the order of the day in 2015 (as far I can see right now).

Copyright © 2015, limkimtong for Living Investment

The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.

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