#tradingpsychology
Big firms favourite saying is , “The market always goes up in the long run.” But as anyone who has witnessed the market’s multiple crashes knows, the market inevitably
sees big drops, and it doesn’t always recover.
Big firms favourite saying is , “The market always goes up in the long run.” But as anyone who has witnessed the market’s multiple crashes knows, the market inevitably
sees big drops, and it doesn’t always recover.
This was exactly the case in both 1929 and 2008, and the results were disastrous. The 1929 crash led to a bear market that continued until 1932. If we assume that people started to invest at the equity high (~380),
they would have seen a drawdown of 88 percent, and
they would have seen a drawdown of 88 percent, and
it would have taken twenty-five years for them to fully recover their losses. Of course, most people wouldn’t have the patience to wait twentyfive years.
When you don’t have a complete strategy that prepares for bad times, your emotional state will dictate your decisions.
When you don’t have a complete strategy that prepares for bad times, your emotional state will dictate your decisions.
In bad times, you’ll liquidate your portfolio at the worst possible time, and be forced to live with your losses forever. You’ll sell, not based on a strategic decision, but
rather by the sight of your bleak bank account.
Laurens Bensdorp
rather by the sight of your bleak bank account.
Laurens Bensdorp
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