The Psychology Of Investing: How To Withstand Market Volatility
Lesson summary:
To stomach the volatility of the stock market, two key factors are important. Firstly, you must feel financially secure with enough money in the bank that you do not need to rely on your investments. Secondly, it is essential to understand that the stock market in the short term is a “voting machine” and can be influenced by various global events that have no relation to the value of the companies you invest in. It is crucial to do your research and invest in businesses you understand, ensuring that the price you pay is reasonable relative to the earnings of the company. Simply buying a stock based on the company name is not enough to make a sound investment decision.