The 7 Psychological Qualities Of The Stock Market Investor
As you may have seen in many films, the psychological profile of the stock market investor is shown as that of a greedy, dehumanized person who only acts for self-interest… Although this is usually the stereotype, nothing could be further from the truth.
In real life, We observe that investors can have very different psychological qualities which contribute in a more important way than we think in making investment decisions.
In the following article you will be able to discover the relationship between psychology and investment through the analysis of the main psychological qualities that characterize stock market investors.
The stock market is about economics, but it has a very close link with psychology The market is the reflection of the interactions between millions of people, who make investment decisions based on their feelings and emotions.
Those more experienced investors know that markets rise when investors are enveloped in a feeling of euphoria, and fall sharply when investors are gripped by fear and panic. These factors make the good investor not only a specialist in technical issues related to the present and future of companies, but also a keen analyst of the psychological climate at all times. And this climate has a very direct impact on the revaluation or depreciation of certain companies and markets.
Personal and psychological qualities involved in investing
To understand this entire process, Next we will talk about the psychological characteristics that most influence long-term investment with the aim of understanding which are the variables that most affect the investor when it comes to managing their own money.
Ambition is one of the fundamental qualities of the stock market investor. When we invest we do so with the objective of maximizing the profitability of our savings whether in the short, medium or long term.
This same quality is what makes us investigate and analyze different markets and companies to detect those excellent businesses that are quoted at low prices. To be an investor you have to know how to optimize time and resources. Thanks to ambition we will be able to set quantifiable objectives to progressively improve our results.
2. Planning
Planning helps us develop our own investment strategy. It will be very useful for us to know how we should act at all times in the financial markets.
The investment plan describes all the rules that our investments will follow, from the market in which we operate, the risk we assume per operation, the indicators we use, or the percentage of money we invest in each company.
3. Adaptability
Faced with an environment as changing as the current one, the investor must have a great capacity for adaptation to detect new trends, growing markets, or possible bubbles that may end up affecting their investments, as in the financial and real estate crisis of 2007.
The ability to adapt is something that we can learn with our own experience through the different situations that we have experienced in the markets. But we can also learn through reading, analyzing the historical events that have changed the course of the markets, such as the crash of ’29, the oil crisis of the 1980s, or the dotcom bubble in the year 2000.
Investor discipline depends on several factors, among which we find discipline in our investment strategy and discipline in savings. Discipline in our strategy consists of following the rules and guidelines set out in our investment plan.
On the other hand, the discipline of savings consists of setting aside a certain percentage of our salary each month to allocate it to investment. Thanks to discipline in these two areas, we will be able to generate good assets over time.
5. Patience
Patience is not only the mother of science, it is also the mother of long-term investing. In today’s society we are used to demanding immediate results to satisfy our expectations quickly.
However, in investing things work a little differently. Long-term investment is not like the 100-meter dash race, it is more like a marathon in which you must be patient, endure inclement weather and exhaustion to cross the finish line.
6. Resilience
Resilience is the ability that people have to face situations of stress and pressure. In the markets we encounter these types of situations every day, and it is essential to have a good emotional balance to get up every time our emotions and insecurities hit us.
During times of crisis is when we must be most resilient. Although our investments are experiencing heavy losses, in these types of situations is when the market offers us greater investment opportunities, which will offer us excellent returns when the storm has passed.
7. Continuous improvement
Continuous improvement is a quality that allows us to enhance the six previous qualities day after day, which is why it is important to work on our weak points so that our psychological qualities are more robust.
There is always room for improvement in everything, and if we manage to improve every day in the way of planning more efficiently, in the discipline of our investment plan, in adaptability to new environments, or in being more patient in certain market situations, we will achieve improve significantly as investors. Even more so when the economic system, technology and the agents that influence trends are factors whose complexity is increasing rapidly.
The balance between technical and psychological skills
In order to obtain good results in the investments we carry out, It is essential to properly combine our technical skills with our psychological preparation
A person who has excellent technical training but does not know how to control their emotions when investing will consistently lose money in the stock market, given that they will make investment decisions influenced by greed, fear, panic or euphoria.
So that this problem does not affect us negatively, it is highly recommended to train, first of all, in all those investment techniques that allow us to operate in a safe and reasoned way, and to work on the psychological part from the moment we start investing with real money.
