WHY EMOTION MANAGEMENT IS MORE IMPORTANT THAN STOCK ANALYSIS
Emotions like fear and greed often influence investment decisions more than analysis. Learn why emotional control, discipline, and patience are crucia
Studying charts, various indicators, and financial reports is a classic habit for novice investors.
I've observed that this habit seems obligatory in their minds. However, they've unknowingly overlooked one crucial aspect: managing their emotions.
In practice, emotions are the most crucial element in determining our investment returns.
When fear takes over
Fear isn't caused by seeing supernatural beings like ghosts, but can also arise when stock prices decline.In my observation, this situation often causes novice investors to panic, become confused, and then sell their shares. They fear the value of their investment will decrease.
However, falling stock prices don't necessarily indicate problems with the company that owns the shares.
The consequences of these fearful decisions sometimes lead to regret after the stock price has risen (creeps up again) and the shares have been sold.
When greed overrides logic
On the other hand, human greed generally emerges when stock prices rise. Many investors buy shares without careful consideration for fear of missing out.
Their logic is completely disrupted, causing them to forget their initial plan and shift to chasing quick profits.
Emotions are difficult to control.
Investing is synonymous with money, and money is closely related to human emotions.That's why investment decisions often feel difficult when compared to decisions in contexts that don't involve money.
In situations like this, we need good emotional management, because even the best analysis can be easily overlooked.
Build discipline and patience.
Emotional management isn't about suppressing our feelings, but rather about recognizing them and not letting them dominate our investment decisions.
Discipline and patience are key because our enemy is the volatile market price. The stock market will yield its best returns to investors who are disciplined and patient, even when experiencing extreme price fluctuations.
Emotions as part of the learning process.
Every investor has made emotional decisions, especially when first entering the stock market.
These emotional decisions may result in losses, but the lesson to be learned is always learning from the experience.
In the long run, investors who can manage their emotions well tend to achieve more stable results than those who rely on technical or fundamental analysis.
This is because they can more realistically assess the strategies they'll employ. Read about this in my other article on more realistic stock strategies for beginners.
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ECONOMIC AND BUSINESS