Investing in the stock market might seem like an investment like any other and instead it is an extremely complex investment that requires considerable skills.
Investing in the stock market means submitting to fluctuations violent financial markets and managing these turbulence is extremely difficult.
Studies reveal that most people who invest in the stock market actually lose, but let’s try to figure out what they are the three psychological traps which make stock market investments substantially losers for most traders.
The first psychological trap is that the past is reflected in the future.
Most traders when choosing an ETF to invest in but also when choosing a stock to invest in look at the past of that action. Let’s take a practical example: When we look at a company like Apple that has always grown robustly, we feel a kind of strange trust within us that leads us to bet that Apple will only grow also in the future. A whole series of conscious and unconscious reasoning with this condition. Those who invest in the stock market are essentially looking for an alibi to be able to justify a certain choice and the fact that a stock has grown so much in the past is a perfect alibi.
Past and uncertainty
Actually the fact that a stock has grown so much in the past it offers absolutely no guarantee that it will do so in the future. Indeed, very often many shares have grown so much precisely because the managers of that company have managed to inflate the value of the shares on the stock exchange through absolutely lawful operations like the bayback. So the fact that a stock has grown so much doesn’t really offer any guarantees. The second trap psychological is that of turbulence.
Turbulence and studies
When a stock starts going up and down and its prices start going down and up extremely volatile all the certainties of the trader are shattered. Consequently, what most traders do at such times is sell when the stock is rock bottom and then maybe buy it back when it is again at a peak point. In short, the beliefs developed in moments of tranquility literally go away during the moments of turbulence. The third trap is that of scholarship studies. There are statistical studies on the stock exchange which appear extremely convincing and which appear extremely persuasive when they suggest investing in a certain way or investing in a certain product. But once again it’s just data from the past.