The Smart Investor
    Facebook Instagram
    Sunday, December 10
    Facebook Instagram LinkedIn
    The Smart Investor
    • Home
    • About
      • About Us
      • Careers
    • Smart Investing
      • Getting Started
      • Investing Strategy
      • Smart Analysis
      • Smart Reads
    • Special Free Reports!
    • As Featured on BT
    • Our Services
      • Our Services
      • Subscribe now!
    • Login
    • Cart
    The Smart Investor
    Home»Investing Strategy»Smart Thought Of The Week: Aversion
    Investing Strategy

    Smart Thought Of The Week: Aversion

    David KuoBy David KuoAugust 14, 2022Updated:October 6, 20233 Mins Read
    Facebook Twitter LinkedIn Email WhatsApp
    Smart Thought Of The Week
    Share
    Facebook Twitter LinkedIn Email WhatsApp

    Did you know that losing $1,000 has a greater psychological affect on us than making $1,000? It is called an aversion to losing money. Whilst we like to make money, we absolutely detest losing it. But loss aversion is more than just a preference for not losing money. It is much more profound than that.

    Loss aversion is particularly evident when it comes to investing in the stock market. After all, aren’t we are told, time and time again, that investing in shares is one of the best ways of growing our wealth?

    We are told that the expected return from investing in shares is overwhelmingly positive. Therefore, we expect to make money from it, come what may. And when we don’t, we are not only disappointed but some of us might even be positively incensed. We start to wonder what can possibly have gone wrong.

    Point is, when we are in the midst of a bull market, we are more than happy for shares to carry on rising, regardless of how expensive they might be. We expect our investments to go up even if their valuations have reached stratospheric levels. But when the value of our investments fall, as they are doing now, we immediately ask how long the correction will last.

    We somehow think that it is unfair that we should be losing money. Surely, that can’t be right. Surely, it must rebound soon. Surely, the correction can’t possibly last this long. Surely, share prices must start to go back up again. Surely, central banks must come to the market’s rescue, as they have done so many times in the past. Surely, surely, surely.

    What’s interesting is that when shares are on the rise, we become more engaged with stock markets. But when markets are down, our emotions can quickly turn from delight to anger. It is precisely for that reason that we should never let emotions dictate the way we invest. We should stick to our plan regardless of what is happening in the market.

    As a dividend investor, my strategy is to buy income. I buy less income when share prices are high, and I get to buy more income when they are low. Regardless of what is going on in the market, I am always looking to buy income. We can only do that if we learn to invest without emotion. And for some investors, it means ignoring what is happening in the short term and sticking to a predetermined long-term strategy.

    If you’d like to learn more investing concepts, and how to apply them to your investing needs, sign up for our free investing education newsletter, Get Smart! Click HERE to sign up now. 

    Get more stock updates on our Facebook page. Click here to like and follow us on Facebook.

    Share. Facebook Twitter LinkedIn Email WhatsApp

    Related Posts

    (TSI) stock market, magnifying glasses

    Get Smart: The Best Stock Portfolio for Yourself

    December 10, 2023

    Top Stock Market Highlights of the Week: Singapore Retail Sales, CPF Interest Rates and CRISPR

    December 9, 2023
    Lendlease - JEM

    4 Singapore REITs That Could Enjoy Higher DPU in 2024

    December 8, 2023
    Facebook Instagram LinkedIn Telegram
    • Careers
    • Disclaimer & Privacy Policy
    • Subscription Terms of Service
    © 2023 The Smart Investor. All Rights Reserved. The Smart Investor, thesmartinvestor.com.sg, an investment education website managed by The Investing Hustle Pte Ltd (Company Reg No. 201933459Z) is not licensed or otherwise regulated by the Monetary Authority of Singapore, and in particular, is not licensed or regulated to carry on business in providing any financial advisory service. Accordingly, any information provided on this site is meant purely for informational and investor educational purposes and should not be relied upon as financial advice. No information is presented with the intention to induce any reader to buy, sell, or hold a particular investment product or class of investment products. Rather, the information is presented for the purpose and intentions of educating readers on matters relating to financial literacy and investor education. Accordingly, any statement of opinion on this site is wholly generic and not tailored to take into account the personal needs and unique circumstances of any reader. The Smart Investor does not recommend any particular course of action in relation to any investment product or class of investment products. Readers are encouraged to exercise their own judgment and have regard to their own personal needs and circumstances before making any investment decision, and not rely on any statement of opinion that may be found on this site.

    Type above and press Enter to search. Press Esc to cancel.