How to not be

There are four psychological stages that people go through during a bear market. Right now, investors know the market is struggling but most believe it will come back. In fact, many see this as a buying opportunity. Here are the four stages:

Stage 1: Denial

Right now, we’re in the denial stage. Anyone who is bullish is too stubborn to change his or her view. Many people have their head in the sand, and some may not even look at their January statements. Many believe the market will come back. Right now, many are still buying the dips, which does not work in a bear market. This is similar to what has happened to oil.

Stage 2: High Anxiety

In this stage, many investors are like a deer in the headlights. They are frozen and nervous but don’t do anything. They are told by brokers and financial experts to stay calm and don’t panic. We haven’t reached this stage yet.

Stage 3: Fear

In this stage, the rampant bulls finally realize they are in trouble. If they have bought stocks on margin, they might be getting calls from their broker to add money to losing positions. In this stage, they are watching in fear as their portfolio burns. They reluctantly start to take action as fear increases. Often they say to themselves, “When my stock gets back to even, I will sell.”

Stage 4: Panic

This is what I call the “uncle” stage. This is when panicked investors throw in the towel and take action. They want to get out of the market while they still have something left. At this stage, there is huge downside volume and double-digit declines on the indexes. At the end of Stage 4, many people vow to never buy stocks again. We are not even close to this stage yet. Typically, we hit bottom when investors capitulate after losses of 20% to 50% in their stock portfolios.

I like this.  The 4 step plan to be a horrible tader.  Its what i had to grow out of.  Most of us start out this way when we marry a stock for the first time.  I never really got to step 4. Gabita es bonita.