Markets always have a way of correcting themselves

Quoted from Rampver Financials’ President & CEO Rex Ma. A. Mendoza, in a market view last February 6, 2018.

© iMoney.ph
Markets always have a way of correcting themselves.

Times of exuberance, are always followed by corrections, and that is what we are seeing these days. On the other extreme, too much pessimism can be followed by recoveries. Rising interest rates (10-year treasuries) have signaled such events but deep plunges are caused by panic.

The impact on investors can be varied. For some, this can mean a decrease in the value of portfolios held, while others can see this as an opportunity to invest, since prices will be better aligned with value.

For some who have been in this “game” for so long, it is proof that “history always repeats itself, but people seldom learn”. It has to be emphasized that people invest to fulfill financial goals.

If we stick to this truth, then we can be more confident about our reactions. These movements are “givens”, or a natural expectation in investing.

Volatility can be a friend if you know what to do.

As my friend Randell Tiongson aptly said, money is behavioral, not technical.

For someone with a poor mindset, it will always be very frustrating. When markets go up, they feel they didn’t invest enough. When it goes down, they think that they should have sold.

If this is the way one thinks, he or she will never be happy. Anyone who says they know when it is at its peak, or at its bottom, will be lying.

It just pays to “topslice” when markets are way up, or “bottom-fish” when markets are low.

But staying invested makes sense because one doesn’t have a crystal ball that will call market movements perfectly.

For many, cost averaging will never fail. It takes the emotion out of investing.