QUOTE(Vanguard 2015 @ Sep 4 2020, 12:03 PM)
I have this caveman theory about stock investment.
Thousand of years ago, our ancestors live in caves. They were surrounded by wild animals. In order to survive, they have the "fight-or-flight" mentality, i.e. they could either fight or flee when faced with danger.
Implanted in our modern brain somewhere, this "fight-or-flight" mentality still exists. We will instinctively run in the face of danger whether it is a fire, bomb explosion or a terrorist attack. Survival is paramount. It takes a trained person like a fireman or a soldier to run TOWARDS the danger.
So, similarly for the stock market, when the market is in a bloodbath, this is perceived as a "dangerous" or unpleasant situation. Our brain's first reaction is to run from the danger. With the proper training, experience and discipline, a trader or investor will also learn to confront the "danger". This is not fool proof of course. There is still risks involved and this is where risk management comes in.
So, how do we become a trained investor? Unfortunately, there is no short cut. One has to experience the up and down of the stock market many, many times. Then hopefully we will become one of the battled hardened veterans.
How is your latest purchases doing?Thousand of years ago, our ancestors live in caves. They were surrounded by wild animals. In order to survive, they have the "fight-or-flight" mentality, i.e. they could either fight or flee when faced with danger.
Implanted in our modern brain somewhere, this "fight-or-flight" mentality still exists. We will instinctively run in the face of danger whether it is a fire, bomb explosion or a terrorist attack. Survival is paramount. It takes a trained person like a fireman or a soldier to run TOWARDS the danger.
So, similarly for the stock market, when the market is in a bloodbath, this is perceived as a "dangerous" or unpleasant situation. Our brain's first reaction is to run from the danger. With the proper training, experience and discipline, a trader or investor will also learn to confront the "danger". This is not fool proof of course. There is still risks involved and this is where risk management comes in.
So, how do we become a trained investor? Unfortunately, there is no short cut. One has to experience the up and down of the stock market many, many times. Then hopefully we will become one of the battled hardened veterans.
Sep 4 2020, 12:31 PM

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