Market Fear: The Cost of Stupidity in Investing

Go Against the Grain: Ignore Fear & Focus on Opportunity

Updated Dec 2022

Volatility will be a significant issue, so be ready to deal with 1500-point moves and when the Dow breaches 33,000, be prepared to deal with 3000-point moves in either direction over a short period. In some cases, the market could shed 3000 points in one week, and the bears will growl that the end is nigh, but if the trend is up, the only thing that will be nigh is their pride and bank accounts. You are being forewarned now this market will make a few people very rich, but riches don’t come quickly. Well, they do; it just appears that they don’t because most individuals are brainwashed into embracing fear instead of viewing it as a non-event.

Fear is an illusion that gains power if one feeds it; the outcome is rarely positive, and if it is, it’s usually a fluke. Here is a simple exercise when fear starts to set in. Ask yourself this simple question? Will I die one day? The answer is obviously yes unless one is mentally deranged; in that case, nothing matters. If the answer is yes, follow up with this question. Do I obsess over this event day and night? The solution for most will be no. Hence if you don’t obsess over your death which is the single most destructive event that anyone could experience, why for crying out loud, do people obsess over a trivial market correction? Why not look at the market correction/crash through a bullish lens?

The Fear Trap: How to Avoid Losing in the Markets and Seize Opportunities Instead

Can you point to one market crash or so-called end-of-the-world financial event that lead to the demise of the world or the financial markets? Nobody can, even those loud-mouthed slick snake oil salesmen can’t . Sol Palha

The financial world is rife with doom and gloom predictions, but history has shown that no market crash or event has ever brought about the end of the world or financial markets. Instead of being swayed by fear-mongering tactics, investors should focus on the opportunities that arise from every fall or crash. Regeneration is inherent in the market cycle; those who position themselves correctly can reap the rewards.

To avoid the most devastating events, it is essential to use tools such as the trend indicator, mass psychology, and sentiment data. These can help investors make informed decisions and avoid losses. It is also important to take profits on profitable positions and avoid commercial media that spreads fear and confusion.

The key to success in the markets is to avoid being a lemming and to stay focused on the regeneration factor. By staying disciplined and focused, investors can overcome fear and capitalize on opportunities that arise from market fluctuations.

Flip the Script: Turn Market Fear into Opportunity and Grow Your Portfolio

If we had to make what is sometimes referred to as an educated guess, it is all but certain that the Nasdaq will trade to and past 15K. Market Update Sept 30, 2020

If we had to add to the above-educated guess, we suspect the Nasdaq could achieve this feat in roughly 12 months. As the markets trend higher, expect the bouts of volatility to increase. In everyday speak, there will be several mini crashes along the way purposely initiated to trigger a stampede falsely. How do the few make money by conning the many; it’s elementary, and nothing will change that order. One could argue (and we won’t delve into it today) that everything most people get into is one big con. Someone has pulled your strings to take that route or consider that option.

Why do you think you buy a specific car, watch, brand, or choose a particular direction for your life; you think you are in charge and making a choice, but all those filters you falsely created are directing you. The only way to awaken is to be aware of what you do and ask yourself why, but none of this can gain traction unless you stop being swayed by mass media.

Hence, cutting the cord is a perquisite, at least in the game’s early stages. Back to the markets; until the trend changes, no matter how sharply the market’s pullback, replace the word panic with opportunity. Let the masses panic while you calmly shop for the best plays at a discount. Once again, remember that only fools focus on the fear factor; wise men focus on the opportunity.

Summary: Overcoming Fear in the Financial Markets

The financial markets are volatile, and it’s crucial to be ready to deal with significant moves in either direction. While fear is a natural reaction, viewing market corrections as a buying opportunity is essential instead of obsessing over the potential for a crash. With the help of trend indicators, mass psychology, and sentiment data, investors can avoid the most devastating events.

Banking profits on profitable positions and cutting down on commercial media can also help position investors for success. The key to overcoming fear is to view it as an illusion that gains power if one feeds it and to embrace market corrections as opportunities to grow wealth.

Research

Numerous academic studies and articles have been written on market sentiment and investing. Here are a few examples:

“Investor sentiment, market timing, and futures returns” by G. William Schwert – This study found that market sentiment can predict stock index futures returns.
“The role of sentiment in the provision of liquidity” by Malcolm Baker and Jeremy Stein – This study found that market sentiment plays a vital role in liquidity provision in financial markets.
“The dynamics of investor sentiment and stock returns” by Malcolm Baker and Jeffrey Wurgler – This study found that investor sentiment can predict future stock returns.
“Sentiment in financial markets and the real economy” by John M. Griffin and Amin Shams – This study found that sentiment in financial markets can affect the real economy.

Articles

“The Power of Market Sentiment” by Investopedia: https://www.investopedia.com/terms/m/marketsentiment.asp
“Why Emotion Is the Biggest Enemy of Investing Success” by U.S. News & World Report: https://money.usnews.com/investing/investing-101/articles/why-emotion-is-the-biggest-enemy-of-investing-success
“The Fear Factor is what Propels Investors to Panic at the Wrong Time” by The Balance: https://www.thebalance.com/how-to-avoid-the-fear-factor-in-investing-4170476
“Market Fear: Losing in the Markets due to stupidity” by FXStreet: https://www.fxstreet.com/education/market-fear-losing-in-the-markets-due-to-stupidity-201711290928
“Stock market corrections are normal. Here’s what you should know” by CNBC: https://www.cnbc.com/2020/09/08/stock-market-corrections-are-normal-heres-what-you-should-know.html
“Why the stock market keeps rising despite Covid-19 and a tanking economy” by Vox: https://www.vox.com/2020/7/24/21335630/stock-market-economy-coronavirus-recession-pandemic