Successful investments using the mountain metaphor
Today we are talking about investing money in the stock market. And specifically about the emotional challenges of investing money. This aspect is often underestimated - which is why this article teaches you what shouldn't happen to you and your investments on the stock market. Of course, this is not investment advice, but only my personal opinion as a private investor and coach.
Investing successfully nice and short
To successfully invest money on the stock market, we need full access to our so-called System 2, i.e. logical thinking. This enables us to inform ourselves and put together a portfolio that we can assume will increase in value in the long term, mirroring human progress. However, our decision-making mechanism does not only consist of consciously controllable processes, but rather of unconsciously running (system 1) processes. On a logical, rational level we can assume that phases of loss that will be steadily made up for in a following recovery phase if there is sufficient diversification. However, on an emotional level, we often go “bankrupt”. Since our System 1 contains a deeply anchored protective function that is coded to avoid pain, this often leads to a strong impulse to act. In downturn phases or stock market crashes, this leads us to act in order to save the still usable capital into a safe haven in order to avoid further impending losses. System 1 prevails.
My mountain metaphor for relaxed investing
I want to compare this process to a mountain hike to prevent you from selling while your stocks are close to the bottom. Imagine you have a long leg up a mountain ahead of you. To get from your starting point to this mountain, there are three smaller mountains on the route. In fact, you know that it would be best if you only climbed upwards. But that is not the way nature is usually designed, and after each ascent there is a downhill passage. The “nature of the exchange” is hardly any different here. Except that you cannot plan exactly when it will go up and when it will go down in advance.
By the way: the presentation of stock market investments as a relaxed mountain hike in nature may represent a change of perspective for many. You can learn more about a change of perspective in this blogpost.
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