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1 Emotion to Avoid During Market Crashes

I like watching movies. The latest one I caught was an animation film called Inside Out. It’s a tale of five competing inner emotions in a young girl and how these emotions come together to form how the girl behaves on the outside.

It occurred to me that investing is similar in some ways – myriad emotions combine to result in the investing action that we undertake.

Lately, emotions appear to have ramped up as the stock market in Singapore displayed strong volatility. To the latter point, in the month of August, the market barometer, the Straits Times Index (SGX: ^STI), had fluctuated between an intraday high of 3214 points and an intraday low of 2808 – that’s a drop of more than 12% in a month.

Within the flurry of emotions is one which may want to keep at bay.

Fear in a sea of red

The first emotion that may hit an investor during market crashes is fear.

Fear can come in many forms. Fear of losing your money in the stock market. Fear that the company you invested in may struggle. These are just two of the many different fears that may manifest. Ultimately, fear may culminate in you selling your shares in haste.

But, it is during times of market stress when we should strive to remember what investing is all about: Earning satisfying returns over the long-term.

And why is the long-term important here? Because staying invested helps stack the odds of success in our favour. And also because long-term investing gives us time to allow the effects of compounding to work its magic.

A Fool’s take

Fear can cause us to easily commit investing mistakes. So, if we can avoid selling in fear, we may then start to improve the odds of having success while investing.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.