Many investors expressed unbridled exuberance at the beginning of calendar year 2020 as equity markets reached new all-time high valuation. The fact that stocks also go down, or fluctuate in value, was not on the minds of most investors. This fact led many investors to take on more risk than they could handle emotionally and financially.
When the market went into a free fall in March due to pandemic related health concerns and the shutdown of the economy, investors understandably panic and wondered if they should move to cash, shift around their allocation or even get out of stocks altogether. Unfortunately, many nervous investors made decision based on emotion and sold assets in a panic.
A few weeks after the drop, the market began to recover its massive losses. Investors not wanting to miss out on the market surge, began rushing back into the market with urgency and the fear of missing out on the recoverly. This time they asked why they didn’t own more stocks. This Jekyll and Hyde change in attitude may seem illogical in retrospect. However, when living in the moment, it’s easy to get caught up in the emotions of the day.
Implementing strategies to manage emotions and the actions you take is imperative.
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