How to remain "irrationally" rational during crashes?


Disclaimer: Please note that all content and information in this blog are for educational and informational purposes only and should not be taken as professional investment advice.

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The only way to profit from market crashes is to remain irrationally rational—to adopt a contrarian mindset of buying when everyone is selling. 

Likewise, during market bubbles or rallies—being able to sell when everyone is buying. If you are able to consistently replicate this over the long-term, it is impossible to not make money.

The stock market is the only place where people run away when there is a discount. 

During crashes, the most "rational" thing people believe is to stay at the sidelines and not invest for fear of losing money. However, it is impossible to invest without losing money. As one invests over the years, losing money is inevitable. It's not a matter of whether you lose money but whether you lose money as a whole. As long as your gains outweigh your losses, it's fine. 

Making mistakes and losing money is part and parcel of investing. The only way to invest without losing money is to not invest at all—simply sticking with risk-free assets. 

But if you wish to earn above the risk-free rate, you have to accept the fact that you will one way or another lose money, but as long as you are able to stomach the short-term losses, you will be able to reap the long-term benefits of staying invested. 

Remain focused on your investment goals and objectives during market crashes instead of being swayed and influenced by the market volatility and fear running wild during crashes. 

Being able to stay rational and calm amidst the irrationality and fear of the market during crashes is your greatest asset. It will allow you to exploit and use market crashes as great buying opportunities to snap up stocks at heavily discounted prices. 

During a sale, the simplest and most rational thing is to buy. Likewise during a market crash, the most rational thing is to buy. Yet, many fail to do so—it is easier said than done.

During crashes, we often find the majority of investors running away from the market instead of running towards it. Instead of embracing crashes as sales, they see it as the end of the world and this cash out for fear of losing even more money. Yet, doing the simplest thing during crashes—buying, is what will enable you to profit off such crashes. 

Without the emotional temperance and discipline to buy consistently during crashes, you are unable to position yourself to profit from those crashes that create many great buying opportunities.

Instead of following the crowd and remaining fearful during crashes, do what sounds most illogical—buying when everyone else is selling, and you will be richly rewarded for doing so—for remaining "irrationally" rational when everyone else is "rationally" irrational because of fear.

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Disclaimer:
The content and information provided on this blog is solely for educational and informational purposes, and should not be construed as financial advice. The accuracy or completeness of the content and information provided in the blog cannot be guaranteed. Before making any investment decisions, it is important for readers to research and carry out independent verification of the information provided, or consult with a qualified financial professional. No warranty and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of actions taken based on the ideas or information found in this blog.

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