There are so many books about the stock market but very few that discuss market psychology. It’s a shame because 80% of your investing success has to do with your psychology. I don’t care if you have the greatest strategy in the world. If your head is not right, you won’t execute it properly.
2020 was a strong year for the US markets. Unfortunately, many people struggled last year. When you dig into the reasons why, you will find the main factor was their mind wasn’t clear. Covid affected people on so many different levels: financially, relationships, health, and their jobs. If your overall mental well-being is affected by any of these problems, you have to work on fixing them before you approach the markets, even if this means taking some time off. Investing involves too many emotions and if you don’t have a strong mindset, you will likely gravitate towards making poor decisions. Here are two ways to help:
1) Improve your self talk. As David Goggins says: “The most important conversation you will ever have in your life is the one you have with yourself. You wake up with it, you walk around with it, you go to bed with it, and eventually you’re going to act on it…whether good or bad.” We all have an inner dialogue in our heads. It’s not that we’re crazy, but it’s the the stuff we tell ourselves that is crazy. Imagine if someone put a speaker up to your mind and broadcasted the things you said to yourself? You would be locked up in a mental institution. Change the negative stories you are telling yourself into positive affirmations and it will completely change your mindset.
2) Stop comparing yourself to others. Comparison is the thief of joy. The number of people who are so concerned with what everyone else is doing is mind boggling. These people don’t care about you, so why do you care so much about them? One characteristic of successful people is their desire to improve themselves. Rather than focusing on others, focus on improving yourself! Someone will always be doing better than you. Letting that affect you will lead to a very toxic mindset.
I can continue on with so many other ways to help such as: exercise, gratitude, doing post analysis of your work, being honest with yourself, taking breaks from social media, and surrounding yourself with great people. I think we all know how to improve ourselves, it’s just a matter of having the discipline to do it! Life’s too short. Stop giving a shit about what other people think and do everything in your power to make progress and to overcome your fears.
If you did well in 2020, congratulations! Just remember to stay focused, keep working hard, and stick to your discipline. Also, stay humble and keep your expectations realistic for 2021. We’re in a unique market driven by liquidity that has never been seen before in history. Take advantage of it, but stay humble and manage risk. I find that once we think we know everything and start to get cocky, the market has a unique way of humbling us.
I can be reached at: jfahmy@zorcapital.com
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