MAB Growth Quarterly Review Q4 2025 - Flipbook - Page 15
Investment insights
The cycle of emotions
It is natural to feel varied emotions over the course
of your investment journey, from the extremes of
fear and greed to everything in between. Successful
long-term investing is about staying the course and
managing those emotions, not allowing them to
shape your investment decisions and behaviour.
Keeping a steady hand during market turmoil
and not succumbing to the allure of the typically
negative commentary that the media bombards
us with is the key to staying invested and bene昀椀ting
from long-term compounding.
However, fear is not exclusive to market troughs.
You can also become fearful when the market
is rising and starts to reach new record highs.
This can elicit fearful emotions as the expectation
of a market fall can cause us to look for safe havens.
We have seen SpaceX go public - its stock market
launch, known as an IPO - with an initial valuation
of $1.8 trillion, making it the sixth largest company
by market capitalisation (the total value of all its
shares). Since that IPO, SpaceX has added a further
$1 trillion to its market capitalisation, overtaking
Amazon and it has Microsoft in its sights.
The chart shows a simpli昀椀ed illustration of the
different types of emotion you may have felt, or
may be feeling, in your current investment journey.
The most important message to take away here is
that the cycle of emotions and the market cycles have
consistently repeated over time. If you are feeling
anxiety over your investments now, you will likely
feel optimism too at some point. This will repeat, not
always at the same pace, but inevitably, the market
and your emotions will 昀氀ow along this path.
The longer you stay invested and maintain the
long-term plan, the more muted those emotions
will become.
It is ironic that the points of maximum 昀椀nancial risk
and maximum 昀椀nancial opportunity coincide with
the opposite emotion. When you are feeling the
most euphoric, that tends to be when the markets
are high, and you have experienced a sustained
move upwards. Your valuation may have increased
substantially; most of the news is positive, and it
feels like the current cycle will continue inde昀椀nitely.
This is arguably the point of maximum 昀椀nancial
risk, as prices could have risen too far and
short-term forecasts have become overly optimistic.
Nevertheless, you must keep to your long-term
investment plan and not become greedy.
The opposite scenario is when markets are falling,
as you may feel panicked, and fear is the overriding
emotion. This is arguably the point of maximum
昀椀nancial opportunity, as markets could well be low,
and much of the news is negative. You could also
feel pressured into making investment decisions
that are counterproductive to your long-term plans.
This is the time to seek reassurance and guidance
from your 昀椀nancial planner to keep you aligned with
your long-term plans and goals.
Some expect markets to fall at some point, and
history tells us that markets will rise and fall but
do trend upwards over the long-term. Timing
the markets is incredibly dif昀椀cult and almost
impossible to do so consistently over the long-term.
A successful strategy is to stay invested and be
appropriately diversi昀椀ed.
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