Fear, one of the primary human emotions, is essential for survival. It is our emotional response to danger, threat, or something dreadful that could happen to us. As human beings, we fear something or the other in our lives. The fear factor may be different from person to person in accordance with their age and living standards.

Sometimes, your fear is a blessing for others who can make a living utilizing it. Think about lawyers, doctors, astrologers, and many other professionals who take advantage of your fear and make money out of it.

In investing, the financial loss would be a nightmare for any investor. The other investing fear factors include interest rate hikes to slow down the pace of inflation. In the past, rising interest rates also shoot up the chances for defaults.

The fear of financial loss leads to fear of failing in accomplishing financial goals or Fear of Missing Out (FOMO) on investment opportunities. This fear will ultimately result in choosing the wrong investment strategies and chasing the wrong investment opportunities. 

Government policies and actions also create short-term fear among investors. Sometimes, even the fear of changes in fiscal and monetary policies may impact investor sentiments, leading to purchasing or selling an investment at the wrong time.

Likewise, pandemic-induced fear (we all have experienced it recently) also triggers fear of financial loss, among many other fears. The fear of war, like the Russo-Ukraine conflict, negatively affected the global economy.

Overcoming Greed and Fear

Warren Buffet, a legendary value investor, is quoted as saying: “To be successful in the stock market, be fearful when others are greedy and be greedy when others are fearful.”

Greed and fear are the most dominating human emotions in investing. However, we can overcome these emotions if we consider these measures.

• Create an Emergency Fund: An investor must keep three to six months of essential living expenses to meet contingencies. An emergency fund can keep greed and fear at bay while investing.

• Educate yourself: Investing would be fatal without basic investor education and investing skills. This knowledge and skills can help you survive the ups and downs of the markets.

​​​​​​​

• Set investment goals: Every journey has a destination. Similarly, investing should have goals to attain success. Investment goals let you plan, do asset allocation and measure your returns.

​​​​​​​

• Get expert guidance: We are not masters of every trade. So, we should get the help of a financial expert or investment advisor to help us achieve our investment goals.

​​​​​​​

As you have seen, fear is a natural human emotional response to danger or threat. But, as intelligent investors, we can manage our fear by taking consistent, deliberate action.

Happy Investing!

Neeru Seal

Alpha Research