Jul 17, 2023

Cory Diary : Managing Volatility Emotion

Managing Emotion

Emotions can have a detrimental effect on average investors who have worked hard to build up their portfolios over a lifetime. These investors typically have a monthly income ranging from $4,000 to $6,000. Through frugality, investments, and perhaps even inheritance, they may have accumulated a million-dollar portfolio after 30 years of employment.

However, when the global financial market experiences a downturn, these investors can face significant drawdowns, sometimes as much as 50%. This means that they could see half of their lifetime of effort evaporate, or $500,000 vanish into thin air. When portfolios experience such losses, it can be financially devastating if investors are unable to maintain their composure. Assuming the fundamentals of the portfolio remain intact, realizing these losses can be detrimental to one's financial well-being.

To manage these challenges, diversification becomes crucial. I personally employ a diversified portfolio consisting of property, stocks from SGX/US markets ( 15 - 20 stocks ), pensions, SSB/T-Bills/FD, as well as funds in my Multiplier and investment accounts. Throughout my investment journey, I make adjustments to the allocation of these assets to effectively manage my emotions and, hopefully, improve my ability to overcome them.

Successfully managing emotions allows me to adopt an investment mindset even when the market is experiencing a drawdown. This mindset enables me to seize investment opportunities. It is important to be mentally prepared for such scenarios and be willing to make necessary adjustments.

Conversely, during bullish market conditions, it may be prudent for me to accumulate cash reserves, known as a "warchest," if the need arises.

In conclusion, I wanted to share these insights to encourage thoughtful reflection. Cheers to overcoming the Monday blues!


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Disclaimer: The articles presented in this blog reflect personal opinions and are intended for informational and sharing purposes only. Readers are advised to seek professional guidance when making financial decisions and should take full responsibility for their choices.

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