“Everybody has a plan till they get punched in the face”. This brilliant quote can be credited to the famous American philosopher “Mike Tyson” :-) . ( His detractors might point out his fetish for ears but didn’t Vincent Van Gogh also cut off his ears).
It’s a extremely impactful statement with implications for any participant in the stock markets. We plan for all kinds of scenarios that the market throws at us. For ex Looking at the market right now we could plan that if the market corrects by 20% we could deploy additional capital into the markets. Simple statement of intent or plan factoring in a possible scenario.
It becomes easy to implement this plan if the market gradually drifts down a percent or two every week and winds up going down 20% over a six month period. It’s a series of small punches that the markets throws at you which tires you out but keeps you in play to deploy the action plan that you had thought thru.
The challenge is when you get punched in your face by the markets when they correct 20% in a week or fortnight. At that moment the mind freezes and all the best laid plans of men and mice go waste. Fear and self doubt seeps in and the reptilian brain takes over.
The R-complex as it is called overrides the more rational functions of the brain and results in primitive behaviour where the survival instinct takes over. We of course see that in the rush to the exit door that happens with market participants.
Can we work our way thru this and retain our rationality? I think the first step is being able to recognise when our mind starts moving into this state.
The awareness of it might helps us deal with a few punches thrown between our eyes.