How to Regain Investment Confidence After A Loss

If investing in the stock market was indeed fire and you’ve been burnt before, then it is only logical that you would want to stay away from it for as long as you possibly can.

One reason many people cite for not investing is that they have made huge losses before or know people who have made huge losses and simply cannot afford to be in that position of loss again.

This is only normal because if investing in the stock market was indeed fire and you’ve been burnt before, then it is only logical that you would want to stay away from it for as long as you possibly can.

However, if you are looking at the stock market as fire, then there lies the beginning of your problem. A better way to view the stock market is as a world of various roads leading to an intended destination.

The goal is more of the destination than the road you chose to get there through. There could be accidents along the way, but that wouldn’t stop you from using roads anymore.

It can only make you change the direction you’re going through, the vehicle you’re going in, and the way to get there – you just might not need to be on the road in the first place; you might need to fly.

People who have made losses before or have even been in recessions where they lost it all are expected to be wary of it. However, this might have made them lose confidence in the stock market or their ability to trade in it.

But completely avoiding the stock market or investing in general can do you more harm than good. In order to deal with the phobia and get your head back in the game, here are some tips to boost your confidence:

Assess The Last Loss

It is not uncommon for people to store the memories of their losses in a dark room and never want to remember again. But denial has never helped anybody. The speed at which you regain your confidence depends largely on what made you lose it in the first place.

You must be able to assess it and determine what the cause of the loss was. Was it the market itself? Was it greed or your carelessness? Was it lack of relevant information? Or was it just poor timing? Not wanting to remember it would only leave you in limbo.

When you have determined what it is, you then need to understand what the better approach should have been. Should you have diversified your portfolio? Should you have put better strategies in place to mitigate losses or should you have been more patient?

When the hurt of the last event is settled, you can begin your re-entry into the investment world.

The Re-Entry Must Be Slow And Steady

Whether you have made losses before or you just happen to be a new investor, entering fast and strong into the investment world isn’t ever a good idea. It is important you start small.

Do not take large positions in the stock market speedily or you will probably re-live the last experience or simply just panic your way to an irrational investment decision. Start by investing small portions of your income.

Instead of investing N500,000 at once or in one day, use the benefit of Naira-cost averaging to spread your risk and invest N50,000 over months to have even more benefits.

Do Not Invest Funds Tied To Your Survival

If the loss you took before was on a portion of your income that you could afford to walk away from, then the hit wouldn’t have caused such emotional trauma to you. To ensure your confidence stays intact, you need to separate contingency funds from investment funds.

Also, diversify by having secure investment in other areas particularly the money market.

Stay Within Low Risk Levels, Comfort Zones, And Circles Of Competence

In an attempt to make it big, possibly to recoup old losses, you might be tempted to take on huge risks to increase your chances of gain. Don’t do it – yet. For you to boost your investment confidence, stay within acceptable risk levels and invest in steady and stable growing stocks.

Spread your risks as well by keeping a well-diversified portfolio always. It is also important to be comfortable with every investment decision you make and invest solely in areas that you understand.

With these tips, remain consistent. It would only be a matter of time before you have the right investors’ mindset to power you through to your goals.

Written by Lawretta Egba.