At this point, the uncertainty of the markets is so apparent that we can’t just overlook it. Amidst the recent triple-digit declines to the Dow Jones Industrial Average and revived dread of an imminent recession, the record run-up of 2020 when it comes to stocks has been placed on hold.
Whether or not that’s just a glitch or hints of a prolonged falling down is yet to be determined. During these times, investors are vulnerable to getting caught up with their emotional turmoils.
We’d like to introduce Dan Ariely. He’s the chief behavioral economist of Qapital, a personal finance app, and he’s also a professor of behavioral economics at Duke University. According to him, there are measures one can take to evade getting swept up and make moves on investment that you might come to regret later on.
Don’t check your portfolio
If you keep on eye on the stock market more than you should, it can only stir your emotions. Ariely states that in days that it goes up, you feel blissful. But on days that it plummets, you feel sadder than usual. The best thing to do is to just not look at your portfolio, which may sound counterintuitive, but it’s not.
Ariely remembered that during the economic crisis, he checked his accounts far too frequently that it bordered obsessiveness. One Friday morning, he just realized that he had become preoccupied with checking his investments, which only worsened his mood. Therefore, he ended up locking himself out of his own account to change his behavior. He then went and had fun with his wife over the weekend.
How to do it the right way
If you keep looking at it as it goes up and down, you’ll not only feel miserable, but eventually, you’ll find yourself acting on that misery. Making panicked decisions based on those kinds of emotions are often the cause of bitterness for people, as Ariely pointed out.
Sure, there are moments when you need to log in. However, the key is to be deliberate in doing it. Firstly, make up your mind about the change that you want to do. Once you’ve decided, that’s the only time when you should open your portfolio, according to the professor. Choosing what to do after opening your portfolio for fun is just simply not a good idea.
Be cautious in making decisions about the future
Every decision that you make regarding the stock market will always be decisions that are linked to the future. Inevitably, a lot of investors make decisions on how to deal with investments based on past happenings. As Ariely would tell each and every investor, it’s water under the bridge. It’s no longer there, and it’s done with.
