Koon Yew Yin 21 June 2020
Investors must always remember that when you buy is not so important as when you sell.
I think writing this article will help investors during the Covid 19 pandemic which is affecting almost all the listed companies with the exceptions of glove and other product manufacturers that can prevent contacting the coronavirus.
Emotions play an important role while making decisions on investments just like any other business decisions..
How can investors navigate volatile markets while also keeping an even keel and keeping a portfolio diversified for the best overall returns through all types of market environments? The key is to understand the motivations behind emotional investing and to avoid both euphoric and depressive investment traps that can lead to poor decision-making.
Investor Behaviour
Investor behaviour has been the focus of many studies and numerous theories attempt to explain the regret or overreaction that buyers and sellers often experience when it comes to money. The reality is that the investor’s psyche can overpower rational thinking during times of stress, whether that stress is a result of euphoria or panic. Taking a rational and realistic approach to investing—during what seems like a short time frame for capitalizing on euphoria or fearful market developments—is essential.
KEY TAKEAWAYS
- Investing based on emotion (greed or fear) is the main reason why so many people are buying at market tops and selling at market bottoms.
- Underestimating risks associated with investments is one reason why investors sometimes make suboptimal decisions based on emotion.
- During periods of market volatility and rising interest rates, investors often move funds from riskier stocks and to lower-risk interest rate securities.
- Dollar-cost averaging and diversification are two approaches that investors can implement to make consistent decisions that are not driven by emotion.
- Staying the course through short-term volatility is often the key to longer-term success as an investor.
The non-professional investor is typically putting hard-earned cash in investments for the sake of receiving a return. Still, they see their investments lose value due to market developments at times. The losses can cause stress and second-guessing. That is, many investors have a relatively low risk tolerance when it comes to investing because losing money is painful.
But risk can be viewed as a guidepost for investing and investor behaviour. Investors who enter into investments with a base level understanding of the risks involved can mitigate a great deal of the emotion associated with investing. In other words, challenges due to emotional investing can crop up when investors see unidentified or higher stake risks than they had originally ascertained.
Current situation:
Due to Covis 19 pandemic, the demand for gloves exceeds supply. As a result, the selling price for gloves continues to go up higher and higher until the pandemic is under control. All the glove manufacturers are making more and more profit which is being reflected on their share prices. As you can see, all the glove makers listed shares have been shooting up higher and higher. Many scientists predicted that the pandemic will not be under control for another year.
The World Health Organisation (WHO) reported yesterday that there were 150,000 new Covid 19 cases, the biggest increase in a single day.
As I said in my opening statement that investors must always remember that when you buy is not so important as when you sell.
The questions are:
Do you dare to buy glove stocks?
Do you want to sell glove stocks?
If you are not sure, you must read my article again.
