Market psychology is the reaction to investing. Learning how the market works can reduce the number of surprises and increase your degree of success.
For market success, develop your awareness and work with a market professional for sound advice and investment guidelines. Participation in the market has its ups and downs, but when you compare non-participation with the right guidance and mindset the probabilities improve.
1. Equalizing the Costs
Costs include monetary and non-monetary expenses. Monetary is comprised of transaction and brokerage fees. Non-monetary is the time spent learning about the market and understanding the investment process along with managing the shifts between the increase and loss.
Much like the past, today’s modern portfolio needs the assistance and watchful eye of an experienced market professional. It’s not enough to guess or even estimate the changes – planning is necessary to anticipate the wins and the losses.
2. Long-Term and Short-Term
The nature of the market is the volatility of prices rising and dropping. Our emotions share a similar reaction between excitement and depression. Surges of pleasure with favorable uptrends and neurotic negatives with declines.
The long and short of it is about now and the future – both terms play a vital role in learning how the market shifts affect your choice.
- Long-term is noted for continued performance and consistent results.
- Short term focus on temporary boosts during innovative or downturn markets.
3. Market Awareness
Start by figuring out your financial characteristics, and what segment of the market works best for you. It takes an honest assessment of your knowledge, means, and objectives. For this reason, working with an experienced professional is a benefit – they are going to help ease the emotional and financial ups and downs.
There are two noted market trends – bear and bull. They are both related to volume shifts. Bear markets have prices falling accompanied by the urge to sell. Bull markets are steady and confident; prices go up involving rational decisions to buy or sell.
4. Manage and Control
Unfortunately, emotions can be drivers for selling early (short-term) diminishing the significant gains (long-term). As we go through various phases in life so does the market. On the average upswing, markets have a lifespan of five years. It doesn't mean earnings stop entirely – but they could settle in with a slower and more steady growth.
Here, diversity and multiple selections are necessary for a healthy portfolio. Don’t underestimate the value of the entire portfolio, one investment increasing won’t stand alone over time.
5. Move Forward
Get over the past experiences and focus on the future. It's coming with or without your approval – better to be part of the plan and manage the calls so you can reap the benefits. Start slowly and build trustworthy confidence to reduce the risk and the stress, allowing the market to respond back to you - positively.
Questions to ask yourself: are you in the right market? Does your plan have a solid strategy built into it? If you have some concerns do yourself a favor and look for help.
6. Change Perspectives
Most individuals don’t always experience success immediately, and our mind begins to associate financial markets with negative emotions. Acknowledge the market is not just about winning and losing – it’s about strategy and duration.
The market will continue to do three things: it goes up, it goes down, or it stays the same. Talking with a one of our financial professionals at California Retirement Advisors will help to manage the market's pluses as well as give you the confidence you need to overcome market psychology. Feel free to contact us today for advisement of how to plan for the best years of your life.
By Christian Cordoba
CERTIFIED FINANCIAL PLANNER™
Founder, California Retirement Advisors
For more information on the market, specifically in terms of bear markets and bonds, watch this video by Rodney Johnson
Investment advisory services offered through Mutual Advisors, LLC DBA California Retirement Advisors, a SEC registered investment adviser. Securities offered through Mutual Securities, Inc., member FINRA/SIPC. Mutual Securities, Inc. and Mutual Advisors, LLC are affiliated companies. CA Insurance license #0B09076. This content is developed from sources believed to be providing accurate information and provided by California Retirement Advisors. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. California Retirement Advisors, nor any of its members, are tax accountants or legal attorneys and do not provide tax or legal advice. For tax or legal advice, you should consult your tax or legal professional.