Sod's Law
It doesn’t take a rocket scientist to appreciate that attempts to time stock market movements stand any better chance of reaping long term rewards than any variety of other gambling forms.
A chart sourced from SG Markets has illustrated this poetically by suggesting the psychological thought processes investors tend to pass through (albeit humorously) as a stock, or the market in general, passes through its various cycles.
American perhaps, but it highlights much of the dilemma faced by both unwary, inexperienced investors and seasoned veterans too.
Our recent research is showing growing levels of despondency in the market among investors and for some the professional intermediaries who advised them into a variety of investments.
For many it is now clear that investing is extremely difficult and that good returns aren’t a natural outcome of investing.
With the repricing of risk, perhaps a little too much much the otherway from the benign situation a year and a half ago, investors are struggling in making decisions.
They are facing what CoreData terms, Decision Paralysis, as they are unclear of where to turn or who to trust.
The limits choices for most average investors are as follows:
- Go it alone – too risky
- Go to a professional – too risky
- Stay in cash – yields too low (and for some “too risky”)
With governments and institutions unable to see very far down the track with any degree or certainty at present, we could be in for a protracted period of frozen activity from consumers and investors. The worst thing the industry is very likely to experience is disengagement from the public – a clear shame considering all the work that has been underway in boosting financial literacy.
PhanTom says:
I think you are confused. A true technical trader using charts does not ever ‘average down’ or buy the dips, that’s what brokers do and advise to do. If a stock price falls you would use a stop loss. It requires discipline and the right psychology, so even a rocket science lacking discipline would fail at this. All the good technical traders that I know including myself were exiting the market back in 07, and have been sitting mostly in cash ever since.