InvestorQ : Why do people who panic in markets generally tend to lose money? They are bound to be worried, right?
Abhi Yadav made post

Why do people who panic in markets generally tend to lose money? They are bound to be worried, right?

Answer
image
Abhi Yadav answered.
3 years ago
Follow

Being worried of your positions is one thing. Acting in a state of panic is another thing altogether. There are two aspects to panic. The first is the ability to let your head rule your heart in a crisis. Let us talk of a stock like Infosys, which had seen a slowdown and a series of senior management exits. Has the management lost the plot? Look at the history. For 20 years it has bounced back from every crisis. Don’t panic. Great companies go through a process of reinvention and rediscovery. They rarely go out of circulation. Don’t panic. Just stay invested because the company has proved itself time and again.

The second aspect is of leveraging panic. Sounds paradoxical, but you can actually make panic work on your behalf and to your advantage. Quite difficult, but that is where investors can make money. Look at any panic bottom be it 2001, 2004, 2009 or 2013. Your risk return trade-off is most positive when the panic in the market is at its peak. This is not the time to panic, but to beat the panic. Sounds hard, but big money never goes to simple and plain vanilla solutions.

0 Views