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2022 2nd Edition (Other Editions)

2022 “Emotions in investment unavoidable?”

Whenever there is a stock market crash, it reminds me of a TVB drama named “The Greed of Man” (大時代). Everyone predicts the stock market will fall because of the war tensions. Yet, the stock market rises unexpectedly on the "Day of Miracle". The villain made the wrong bet and jumped off from the top of the building. Attracted by profitable returns, most people want to succeed in the stock market but their decisions are always affected by emotions and the result always comes out of their surprise.

During the bear market, people feel pessimistic and they tend to avoid loss rather than realise the possibility of gains. Although it is one of the best timings to purchase stocks, they seldom do so in order to avoid further loss. On the other hand, many people, including the elders without any investment knowledge or experience, would rush to purchase stocks when there is a boom in the stock market. They don’t want to fall behind by others. However, most people actually have not evaluated the stocks yet and these timing are usually the days before the burst of the bubble.

We all know the basic principle of purchasing stocks is “buy low, sell high”. But most people always do the opposite in reality. This behaviour seems irrational but understandable as we never know when the “true” low point or high point is. This explains the risks of buying stocks.

To live a healthier, longer, better life, we need a long-term investment plan. We have to plan ahead in case of an economic downturn and volatility in the market. Investment is not gambling. Gambling is often irrational but investment could be rational if you allocate your assets well. We should not put all the eggs into one basket. Instead, we need to diversify the risk. For example, you can allocate your money into various financial assets such as bonds and commodities (or you can buy funds) instead of solely investing in stocks. This can make your portfolio less volatile and thus generate a more stable return.

Driven by greed, people always want to get more. In reality, they always pay more. The reason behind is they lack appropriate long-term financial planning. Thus, a financial coach can guide you to make informed financial decisions and construct a portfolio according to your own risk aversion and return preferences, to live a healthier, longer, better life.