Explaining Market Sentiments

Do you always stare in your investment portfolio? Seeing more reds than normal colored fonts? Yes, most of us seeing “red fonts” in our investment portfolio.  But who cares?  If your intention is to keep your funds in long period of time then no need to be worried about.  If it is your real goal.

But, what if it is not?

Because you just dragged by some friends, saying stock investment is very cool to do, without proper studies or mentoring, and you have lot of spare money to burn.  Then stock market eating you alive, watching your equities melting under ticklers and you are panicking.

Until you decided to sell all your equities in lower prices to stop further melting and live your life as is.

Sadly, during this bear market season, many people act like this, all time season investors and newbies.  Both are dragged by their own emotion and fear.  These are called market sentiments.

Market Sentiments.  In Simple Explanation.

According to Investopedia, market sentiment is the feeling or tone of a market, or its crowd psychology, as revealed through the activity and price movement of the securities traded in that market.

It simply says any movement in investments such top-ups or withdrawal of funds due to emotions like fear, and excessive greed that may affect the normal flow of prices in the stock market.  If more people got panicked due to  dip-sinking prices, they attitude is to withdraw funds even if they incurred losses.  This emotion, in a large scale, affects the normal flow in stock market.

It will result in much lower prices. More lower prices, more people will be unhappy.  But for long term investors, it will be an opportunity to buy more shares in cheaper prices.

Market sentiments affects greatly our current prices. Even big corporations who failed to oversee their investments, dumped their investments in lower prices.  This behavior greatly helps the bear market in longer period.

Is it Possible to Avoid Market Sentiment

No. Market sentiment is a normal occurrences in financial industry.  We cannot stop it.  But here are some simple solutions for able to minimize the negative market sentiments.

  1. If prices are gone low, continue to buy more.
  2. Never dump all of your stocks yet.
  3. Learn to differentiate between paper loss and actual loss.

Buy now.  Prices in stocks are majority cheaper than yesterday. Simple rule in investing “Buy low, sell  high.”

Happy investing!

 

 

 

 

 

 

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Eleison Cruz

Financial Consultant. Personal Finance and Investment advocate. Author of The Good Asset, a blog that educates people in investments, financial literacy, and life insurance. Visit www.thegoodasset.ph

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