• 2024-03-31

Two tips to help you repel the interference of Mr. Market

A friend asked the other day, they easily get carried away by the market. They are very scared when it falls and dare not buy, but when it rises, they regret and want to add more positions. What should they do?

The ups and downs of the market are the most normal things.

In fact, those who truly have certain psychological qualities, or rather, those with investment experience, are not easily affected by the market.

I would like to share two simple and practical tips to reduce the impact of Mr. Market~

Tip one: Reduce the frequency of checking your accountThe first technique is to reduce the frequency of checking accounts.

Many investors have a not-so-good habit of frequently checking their account profit and loss situation.

A previous survey report from Jing Shun Great Wall Fund Company, "Equity Fund Investors," showed that:

- 30.5% of investors check their account net value and income ranking every day.

- 50.2% of investors occasionally check their account profit and loss, with a frequency of a few weeks or months.

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- 18.3% of investors do not look at profit and loss for more than a few months, focusing on long-term returns.

- Additionally, 1% of investors do not know where to check their earnings.In fact, the more frequently investors check their account profits and losses, the higher the proportion of losses they incur.

This is also due to an investment psychology: myopic loss aversion.

People's psychological feelings towards gains and losses are different.

Investors' feelings about the same amount of loss and profit are not the same. The pain caused by a loss is two to two and a half times the joy brought by a profit.

In other words, the pain caused by a loss is far greater than the joy brought by a profit.

If we lose 100 dollars, the pain can only be compensated by finding 200 dollars.The psychological effect of this short-sighted loss aversion is very powerful and can greatly influence our decision-making.

Therefore, it is best to avoid frequently checking the market fluctuations when investing, and instead, try to have longer intervals, look at the account less, and worry less.

Skill Two: Make a plan, invest rationally

Another trick to avoid being led by Mr. Market is to make an investment plan in advance, and it's best to write it down on paper.Including how funds are allocated, the timing and frequency of fixed investments, the amount of fixed investment, and the conditions for buying and selling.

Using clear numbers and investment plans to constrain our investment behavior, thus avoiding being influenced by Mr. Market.

Summary

Even if we understand the principles, it is natural to worry and fear when encountering fluctuations.Especially at the beginning, encountering fluctuations can be quite painful, as one has to struggle against their own human nature.

However, with time and persistence, investing becomes like an automatic process, and one can remain calm and composed even when the market rises or falls.

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