How to Get Over Market Fears
The stock market tends to follow certain trends. Out of them, the two trends are most common i.e. bullish and bearish trends. A bullish trend is defined, when the stock market is moving upward, while the bearish trend is defined, when the stock market is moving downward. Everyone loves to make money during the bullish period. But losing money is one of the worst nightmares for an investor. But there are certain periods in history, where investors lose large amounts of money. Such losses drastically impact investor’s psychology and will to invest in the stock market again. One such crash in recent history is the 2008 financial crash, which forces a lot of new millennials to stay away from investing. Young investors see the horror of the stock market losing a substantial portion of their value. That’s shaken the belief of most young investors. But one bad month, day or year cannot account for the rest of share market credentials. The stock market history has a majority of periods bullish. So, if fear is keeping you out of the stock market, then it’s time to think. It’s better to overcome fear by practicing these habits:
One of the best ways to overcome fear is to get educated about the complexity of the market and its dynamic forces. A deeper history will let you know about the reason behind the crashes and what mistakes investors made. An idea about that will help you in avoiding too much risk. If they learn how the markets work, so, they can better prepare from past experience about future market conditions.
Invest for the long term:
Instead of shying away from the investment, an investor should stay invested for a longer period. The stock market tends to be volatile during certain periods. But the volatility reduces as the time span increases. A smart investor will always look for a larger time span for investment such as 5 years and 10 years. It will not only reduce the risk but also provides better returns. If an investor invests for a longer time period, then he/she will never get panicked by volatility in the short term.
Invest with a small amount.
A young investor grips in fear of losing capital. The larger the amount, the more the fear will be. In order to avoid the negative impact of fear on his/her investment, one of the ideal ways is to start small. Instead of investing a large amount of money and increasing the risk-reward proportion. It’s better to start with an amount, which justifies one’s risk according to age. In case, even if an investor loses money, the loss will be quite less. As one gains confidence in the stock market, one can increase the amount. So, always start small.
Make a proper strategy:
One of the best ways to make money in the stock market is through proper strategy. In case, even if the market is not up to expectations, a proper strategy will help in reducing risk. It will also help in the diversification of the portfolio. Young investors should look for different types of stocks such as large cap, small cap or mid cap which helps in diversifying the risk.
An investor should be consistent with their investment principles and follow the fundamentals of investing i.e. buy low and sell high. The fears prompt an investor to sell low at the market bottom and greed that forces them to buy higher. Such an investment strategy always results in a loss. In order to reduce losses, due to such investment decisions, it’s better one follows “Rupee cost averaging ‘’. By following a systematic investing at predefined intervals over a long-time horizon, will help in reducing the loss.
At the end of the day, an investor is a human being who sometimes makes decision based upon their emotions, whether its fear, greed, peer recommendations. But a smart investor never allows their emotions to ruin his investment decision. It’s every decision should be based upon logical and proper strategies rather than following the herd mentality. So, at the end of the day, he/she should feel responsible for his decision.
*Disclaimer: investment in securities market are subject to market risks, read all the related documents carefully before investing