Good times, bad times

Any investor would have made money in good times. When there are positive company guidance, a robust growing economy, increasing corporate and consumer confidence, optimistic forecasts and a bubbly market, higher stock prices are observed. Any investor could have lost money in bad times. When business conditions turn sour, corporate profits disappears, the economy goes into a tailspin, black swan events happen like an oil crash recently, and now facing a global pandemic in full swing, stock prices fall violently.

The maxim "buy low sell high" is so simple to understand but in reality, not simple to put into practice. It conflicts with our natural human behavior.

During good times, investors rejoice on their stock gains. A rising tide lifts all boats. Prices continuously goes up and making money is deceptively easy. Knowingly, this is when the market could be inflated and the risk is high. However, our desire for more pulls us to join the party. We sometimes let our guard down and continue to dance for far too long. This doesn't feel like the right time to "sell high".

During bad times, the opposite happens. We feel fearful of the current situation and the uncertain future. Money is already lost, and it is disheartening to see our portfolio value goes lower and lower by the days, weeks and months. We are frozen with inaction or compelled to take action to stop the bleed. Sometimes, emotions overcome us and we give up by exiting the market. Unknowingly, the untenable market situation could be one of the best time to "buy low".

It's not easy to get the investment decisions right always. More so when greed and fear are messing with our brains during the good times and bad times. Perhaps, one should formulate and commit to a disciplined investment plan. We might have more success in going against our instincts through the focus on executing an emotionless strategy.