The idea of the stock market is complex and daunting for many people. On wall street, those who expect the market to go up "bulls" are constantly battling the more pessimistic "bears" for a search in their piece of the pie. Ideally what they both share is research, a timeframe, a goal, and execution. Without these traders can be stuck in a trade and try to make up for it in the short term, which can lead to more losses.
The way investors function can be applied to anyone looking to improve their current situation but investing in themselves instead of the market. Optimal mindset, honesty, and the right tools can lead to a more accurate and fulfilling financial lifestyle.
First, your own personal market can depend on the position you take, either being a bull or bear. Realizing that just like every major market crash you can recover and then continue to grow is a powerful outlook tool. Having a negative mindset can make someone more vulnerable to negative feedback. A behavioral study on rats found "The 'pessimistic' rats were significantly more sensitive to negative feedback than their 'optimistic' conspecifics".
In addition, a study on people found that "Ruminating on stressful events can further prolong negative emotional responses, especially for those who are pessimistic".
It is important to be resilient so that major events do not have a lasting impact, but also useful to be flexible in case a plan doesn't work out.
However, subscribing too much to optimism can lead people to attribute it when chance is involved in success. Less should rely on chance, and more on the actual steps taken. Someone can become stuck in a loop of negativity without realizing it by being too optimistic about chances, which can lead to gambler's fallacy.
The key is to be honest and straightforward about one's current situation. This is similar to how an investor looks at the fundamentals of a company such as its business structure and current statistics and considering both the bulls and bears before making a decision. Taking an accurate picture of the present as a starting point allows for the path towards a goal to be drawn. If it is done too conservatively or without much regard to risk, the goal may not be within reach. A careful balance is therefore required.
It is crucial to have a strategy when talking about a person's individual finances. Just as an investor will have a goal before taking a position, having long-term goals with a series of steps to achieve them is powerful. In addition, having a backup plan for when something goes wrong should be anticipated when setting a goal.
There are various tools (and people) that can help you achieve financial goals such as the useful phone application Mint. Mint can keep track of your spending, help you set goals, and create a budget along with graphs to visualize information for making decisions.
By tracking your finances and treating them as though you are both the owner and investor, it can help you reduce the risk of big emergencies and help limit your unnecessary spending once there is a greater cause to put your money towards, such as education expenses, leading to less debt and more satisfaction.
