Dealing with an Emotional Market
May 22, 2021
I see the market as a living, breathing being. As with all beings, it has its rational and emotional sides.
And I, personally, am not one for drama. While it’s very easy to get caught up in the emotions of the market and the collective excitement and/or fear that causes the market to dramatically shift one way or another, I try to distance myself from those emotions and focus on the market’s rational side.
I ask, “Did something drastically change such that my thesis no longer holds?” That could be a change in a company leadership, operations, mission, product-market fit, or the total addressable market. These are all things that I take into consideration when selecting a company for investment. If nothing changed, I attribute the market fluctuation to be the emotional, collective fear and I don’t think about it.
I’m the type of person to do their homework and, once I’m confident in my knowledge to make my investment, I typically stop thinking about it. I know how hard I work to understand a company’s fundamentals and trust myself and the people I surround myself with (the 7investing team is amazing in case you haven’t noticed!), so I feel completely comfortable purchasing a stock and not looking at it. If it wasn’t for the team chat, I wouldn’t have known about recent selloffs. My response was to buy stocks I didn’t own and utilize the recommendations of the 7investing team to inform me of companies that weren’t on my radar.
I also do a lot of different things and play different roles, so I have learned how to prioritize and compartmentalize my brain activity. There’s a lot of noise in the world and for me to focus on my work, I have to find ways to soften the noise. Day to day, or even worse intraday, market fluctuations are just noise to me and distract me from doing the work I’ve prioritized.
I am investing for the long term. I know my investment horizon and my level of risk and I’m comfortable with that knowledge. Being able to separate myself from the emotions of the market allows me to invest with confidence rather than anxiety. With there being plenty of other things that create stress in my life, I’m glad I can make wise investments that will withstand the market in the long term, so I don’t have to worry about it.