What should you know?
During your investment journey, you will likely experience a wide range of emotions, as markets move through their inevitable cycles. Your ability to remain calm, and stay the course, in the face of these emotions is a critical factor in determining your investment success.
The diagram below illustrates the rollercoaster of emotions that investors can go through during market ups and downs – from euphoria during the best times to fear and panic during (temporary) market declines:
Why should you care?
As humans, we can be swayed by our emotions and when these take over our investing brain, it can lead to expensive mistakes.
None of us know what the future holds so trying to time the markets is futile. Markets move in response to an unfathomable number of ever-changing variables and sentiment can swing in a heartbeat.
The only thing we know for certain is that investing in a globally diversified portfolio of the best companies in the world has a strong and lengthy track record of delivering long term, inflation-beating returns.
The only surefire way to realize all the gains that the stock market offers is to control your emotions and stay invested for the long term.
Remember: a permanent loss from investing in the stock market is a purely human achievement and is ALWAYS a result of investor behaviour.
