Have you ever thought how Fear distorts your perception of investing and decision making ?
Well if you’ve ever wondered why you felt confident after a winning investment and fearful after a bad one and then more fearful to repeat investing it’s nothing but the fear and the fear has turned to a belief as some beliefs of ours are product of our Experiences ! “The more fearful and emotional an experience the stronger it gets stored in the memory ” So with this insight we can claim that some bad investments can totally alter the way you perceive about the markets.
On a more rational level what’s Fear ? It’s the Amygdala reaction to how your perceive something . A snake 🐍 looks fearful to you because of your previous experiences about fear , the societies view about a snake and as a child what were you told about a snake ? And most of all how you perceive a snake and your perception ! All this forms a unshaken Belief about a snake ! So when you encounter a snake you feel fear even though there’s nothing to fear about unless you disturb it ! But a snake to a someone like Steve Irvin Is no more than a toy why ? Because their perception of snake is different from ours !
Alike same way how as a investor do you see your investments go down by 50 % what do you perceive ? What were the TV commentators saying in 2008 when stocks lost value ? What News paper says ? Well totally gripped with fear as if world is going to end . But only the snake catcher who has held snakes knows what to do when you a snake – This is where opportunity lies ! So a rational mind like Buffett fishes as much as possible in those times !
Biology of fear : I was reading The Buddha Brain – recommended book which talks in detail about what fear does ! Well Fear is a Amygdala Reaction and release of hormones like cortisol ( Hormones go directly into blood stream caused higher effect as opposed to Neurotransmitters which releases chemicals at nerve endings ) ! Let’s not dwell deep but when you’re gripped with fear the more Logical analytical Pre frontal Cortex shuts down and Amygdala takes over which causes brain to be in a state of panic and fear is embodied ( you can feel it ) !
Finding Objectivity in Fear : when we know that people most of them are reactors who are gripped by panic how to make use of the situation ? Market information is always unbiased it’s how you perceive them that makes it so. when you’re seeing market information with fear you will find ways to avoid those information because Brain is wired to avoid painful information !
In 2008 only a handful people made use of the opportunity to load on to stocks while all the others who were gripped with fear made decisions that were against them !
” The aim of being Clear is to make your mind work in favor for you at times of great panic ”
Investors Fear : Have you ever felt this ? Made a successful investment and was in flow and after which due to some losses lost confidence and started gripping with fear as to I may lose this ? Market is not for me ? This is a common fear experience and what has happened is a Fearful experience is now shaped as a Belief so you now operate from fear and when you’re operating with fear the information you see may look fearful even though all market information is objective it’s your perception that’s changed from a winning investment to a losing one .
So what do we do ? Well being Present-minded and Self aware is the biggest skill to develop to take on the dragon of fear .By seeing information and facts objectively rather than seeing them with distorted way can help investors to be able to decide at time of utmost panic .
I have been meditating for a year now along with yoga and I have seen changes happening as I’m being able to focus more objectively .
Thanks to these books I read in 2017 and the wisdom to apply them practically. so I was able to scoop up some companies at a small mid cap meltdown in 2018 ! Elections can cause huge panic so now you may know !
Books to read to know more
1. The Buddha Brain
2. Iconoclast
3. Emotional intelligence
4. The biology of belief
Master Moves 