Behavioural Factors of Investing

The following was extracted from Business Times - Putting things in perspective by R Sivanithy

I think this is a great article that describes the soft side of investing.

What moves stock prices up?

Fear, greed, self-interest and mindset conditioning. These are the same emotional factors when the market falls.

These are the facts that will exist everyday in the market. Because we humans are driven by these. That's why I admire Warren Buffett for his logical decision making and mindset. I believe he left out those undesirable emotions out that clog out making the correct decisions.

As the market moves up, it boost the egos of everyone from politicians to company bosses. However, once the market falls, their egos will be bruised.

Everyone wants to see the market rise indefinitely but no one wants to see it fall. This is human nature. After the market falls, everyone starts to worry and wants to know when will be the end of the market fall. Did they consider how far the market can rise?

This year, the STI has been up around 17% and a day's loss of 3% cause a market panic. This shows everyone's high aversion to risk. It also shows that most investor takes risk more than they can swallow. They should know by now of the volatility of the market. So was it necessary to panic to a selldown? Fundamentals are still the same or is it not?

Because the market tends to swing from end to the other end. I believe that the fundamentals are still stable for companies. Check their 1H financial report and it shows it all.

Although I'm not an experienced investor, I recommend everyone stay invested according to their comfortable risk aversion level. Or else when the market corrects again, you will tend to be swayed by your emotions and panic.

Most importantly, do your homework.