Market Occurrences
Investors are often too quick to make their moves. After all, some of them have a gambler’s mentality and believe that it takes just one quick, risky trade, and they’re set for life.
At the same time, you have the opposite type of investors. We’re talking about people who are afraid of everything. These people are equally as bad for the market since they refrain from buying and rush to sell at the first sign of trouble. Sometimes, it’s not even a sign of trouble but a regular market occurrence.
With all of this in mind, and in order to talk a bit about this other group (that doesn’t get nearly as much attention), here are the top seven market occurrences that frighten investors (sometimes for no reason).
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Growth that’s too fast
In theory, this would be an amazing sign; however, there are a lot of reasons why this is of some concern to investors. First of all, everyone has seen a graph, and everyone knows that there are no graphs that go up. On the other hand, it’s possible for a stock to never end its downward spiral. So, at one point, it will surge; you just don’t know when.
On the other hand, when something starts growing too fast, there are a lot of people who will accuse it of being a bubble. The worst part is that this happens more often than you think, which is why this accusation/suspicion isn’t completely unfounded.
When the company is too big to be accused of being a bubble (Like Meta, Alphabet, or Apple), there are those who will doubt the sustainability of its growth. Sure, it’s going up now, but for how long?
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Short-term market volatility
Just take a look at any stock, even from the most stable of companies, and you’ll see numerous dips, most of which recover shortly. Sure, there are some fields and markets that are really volatile, but this is not the case every time.
Not only is short-term market volatility normal, but its absence is what’s really suspicious. So, if you feel twitchy every time your stock dips by 0.1%, investing just isn’t for you.
Take, for instance, day traders. With the right strategy, a day trader can be profitable with just 25-30% of successful trades. This means that, in order to become a successful day trader, you have to learn how to take your losses.
Setting your loss order at 1-2% of your total net value will leave you almost unharmed, but it definitely won’t feel nice. The thing is that you need to accept both the good and the bad. This is the only way to make your decisions truly data-driven.
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Lack of information
In the past, a lack of transparency was a huge problem that a lot of investors had to deal with. Now, in the modern era, with the help of a stock trading app, you’ll get all the numbers updated in real-time. You won’t even have to rely on your broker that much.
You can even set up your notifications for any news regarding the stocks you’re buying. If you’re buying regulated stocks from well-known companies, the availability of information is pretty high. Now, if you’re afraid that they’re hiding something. You’re probably right, but it’s also quite irrelevant.
You see, never before did you have access to so much information. Even more importantly, never before were you able to process them the right way. Today, with modern analytical tools and robo-advisors, you have a far more accurate insight than ever before.
The thing is that you’ll never know everything and if there’s a lack of information on the particular company or asset, you can always pass on the opportunity. There’s no one to force you to invest.
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Media sensationalism
Serious investors hate media sensationalism. Why? Well, because it draws in a lot of layman investors, who will buy stock without any previous research just because they’ve heard about it on the news. When this happens to a large enough audience, the result will be pretty unpredictable and disruptive.
Also, depending on what direction the media reporting takes, it could either trigger FOMO or fear-selling, which could be so volatile that it drops months and months of your careful research down the drain.
Just think about it: you’ve analyzed the charts, done thorough research on the team behind the company, and done a complex risk assessment equation, only for thousands of people to start selling because they’ve heard something “scary” on TV.
The worst part is that it doesn’t even have to be true. Let’s face it: modern media is not really known for its affinity toward fact-checking.
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Political events
Sure, massive political events like US elections, BREXIT, the start of a war, etc, all have a major impact on the value of fiat currencies, stocks, and everything else. However, not every major event turns the market upside down. After all three of these events, the market eventually stabilized.
There’s always someone proclaiming a doomsday is upon us, and it never really is. In fact, the market usually stabilized far sooner than most people expected.
It’s also important that the correlation isn’t always as strong as you would expect. Sure, sometimes, when the event involves a clogging of the massive trade route (like the current happening in the Red Sea) or a massive exporter (like the grain situation regarding the Russia-Ukraine conflict), things can be problematic. Nonetheless, commerce reigns supreme, and even these events, even if not resolved immediately, are provided with an alternative.
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Economic indicators
Once again, whenever there’s talk about high inflation or a high unemployment rate, people always assume that recession is inbound. The problem with this lies in the fact that things change on the market all the time. This is the whole truth.
The big difference is that when people become investors, they start noticing things that they never paid attention to before. It’s like when you start thinking about breathing; immediately, you switch from reflex (automatic) to manual breathing.
Among these events that have investors frightened, the most common are:
- GDP decline
- Rising unemployment
- High inflation
- Falling consumer confidence
- Increasing interest rates
While all of these signs are indicators of the economy on a decline, it’s important to understand that, like stock value, the economy sporadically goes up and down.
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Tech industry
People are so afraid of a hyped-up tech business that they might give the entire industry a wide berth. The thing is that there were so many false promises and bubbles related to it. Just take, for instance, the dot-com bubble, and you’ll understand completely what so many investors are afraid of.
The key thing to pay attention to is the importance of the fact that people are already oversaturated with hype. Sure, they’ve seen so many crypto millionaires, and in modern fiction, whenever there’s a time-travel trope, everyone always invests in Apple and Google before they were a thing.
It’s far from the fact that people don’t believe in tech – it’s just that they’re tired of listening about “the next thing that will be as big as the internet” every couple of days.
Being too cautious will prevent you from exploiting your full potential
We’re not suggesting that the above-listed factors are unimportant. If anything, paying attention to them can be quite significant. It’s just important to avoid developing tunnel vision. There are more factors at play than you expect, so take as much time as you need and keep in mind that there’s no investment without a risk.
