3 Market Psychology to Abide When the Market is Down

stock market psychology

*This blog post is my personal opinion only and may contain affiliate/referral links.

For NASDAQ growth stock traders and investors, the stock market has been testy this year. Mid to small cap companies are particulary hit and continue to be vulnerable. And even big cap stocks like $APPL, $FB and others are taking a bruise with the decline.

There are bountiful times and then there are times of draught. 2020 had been a year of significant growth for these technology-laden sector, but that is quite the opposite this first half of the year.

Some investors who had enjoyed their growth stocks peaks last year are becoming fazed and weary with their portfolio performance this year. I don’t blame them; i am one of those investors too. But how exactly should you approach this mentally?

Market Correction is Part of the Stock Market Game

Whether it is on the 20% correction territory or more, this mini and major crashes are part of the risk of being a stock market investor. This holds true even for established companies like the stocks that the market tracks on the indeces. Look at it this way, the S&P 500, the Dow Jones and other indeces won’t be enjoying their all time highs if there is no sell off at one point.

Market Sectors Have Different Performances

By the end of 2020, tech stocks enjoyed one of the most robust gains among all the market sectors. The performance can possibly be attributed to the remote lifestyle that we all experienced during the pandemic. Work, online shopping, gaming and many more are just some of the facets of having a computer-dependent setting.

On the same year, energy stocks and real estate stocks had been very rocky and are not getting the same interest it is having now. Fast forward this year, the S&P Total Market Index (TMI) Energy is floating on 42.13% YTD return.

Long Term Vs Short Term

This is an intuitive market psychology that many investors do not pay attention to when they first place a position on their stock of choice. How long do i intend to hold a stock? What is my exit strategy? What is my stop loss price target? This and many other questions will

Being able to determine whether their stock is for short or long term holding is a good practice because it gives them a timeline of their expectations. Long time holders believe that their stock picks will net them gains and dividends in a few years time. On the other hand, short term investors have a shorter timeframe usually five years or less and are ready to pull out their stocks after it serves their investment purpose.

Thank you for reading.

Jay

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