The Emotional Cycle Of Investing

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With the extreme ups and downs in the market, you would think that no investor in their right mind would want to go through such a roller coaster ride. These markets have made people weary and investors are asking themselves whether stock investing is a viable solution to meeting financial goals.

These are the typical emotional stages a person goes through when experiencing the so-called wonderful world of investments.

exit, stage left

In this stage, you have embarked on a journey into the investment world. Your hopes are high as you start crunching the numbers on the calculator to make early retirement more of a reality.

Stage 2: Excitement

This is the initial increase in the market, where the investor is on cloud nine. At this point, you are further calculating numbers and looking at the possibilities of growth if you put more money into your investments.

Stage 3: Thrill

You cannot believe how much everything is moving up and how quickly it is happening. You are thinking about retiring in the next couple of days if things continue going the way they are and you are completely flabbergasted.

Stage 4: Euphoria

This is the point of maximum financial risk, where the market is flying too high to be true. Stocks are overvalued, and individuals are seeking high-risk investments to finance their short-term goals. This is where self-discipline is important, as investments should be made for the purpose of saving.

Stage 5: Anxiety

The market has begun to pull back a little, and you are realizing that making money on the market is not as easy as it once was. You are in a state of unease, as your future becomes uncertain and you are somewhat concerned about your investments.

Stage 6: Denial

The market has continued to decline, and you are considering getting out of the investment world. This is a dangerous point, especially if you are getting out for no particular reason.

Stage 7: Fear

Being scared is only normal, especially when your investments have significantly declined. The key to getting through this stage is to remain focused and realize that you are investing for the long haul.

Stage 8: Desperation

Having lost the majority of your portfolio to a market decline, you now have the "all or nothing" mentality. This stage can be detrimental because your emotions will likely take over. You have to remember why you invested in the first place because reacting to your emotions will ultimately cause more harm than good.

Stage 9: Panic

You have begun to notice that the market is in a panic selling mode. Investors are likely to act as the masses. Have you not been told as a child to always go against the grain? Those are the people who will win out in the end.

Will you ever get back to your initial happiness?