"I have been investing in stocks for a few years, but I recognize a significant 'flaw': I often 'miss out' on profits. The most recent example was with NVL stock. I bought it when it was VND 10,000. By late April, NVL had risen to over VND 20,000. I considered selling but feared it would continue to rise, leading to regret later, so I held on and waited. As a result, the stock dropped to VND 16,000 in recent days, prompting me to hastily sell, missing out on VND 40 million in profit."

"Is there a way for me to avoid this?"

Cam Tu

Investors monitor the stock market at a company in Ho Chi Minh City. Photo: Thanh Tung

Expert advice:

This mindset is common among many investors, especially during periods of high stock market volatility or rapid stock price increases. I will share some general insights into behavioral psychology and methods to reduce investment pressure.

First, in behavioral finance, there is a concept called the 'anchoring heuristic'. Simply put, the brain often latches onto a certain price and uses it as a benchmark for making decisions. In your case, two psychological 'anchors' might coexist. The first anchor is the purchase price of VND 10,000. Because investors bought at a low price, when the stock adjusted from VND 20,000 to VND 16,000, they still tend to think, "I'm still making a lot of profit," thereby delaying the decision to sell.

However, the stronger anchor is the price region of over VND 20,000 that NVL once reached. From the moment the stock hit this level, the brain began to assume this was the 'fair value' of the investment. Therefore, as the stock gradually declined, the feeling was no longer "I'm still profitable," but rather "I'm losing the profit I once had." This is why many investors feel deep regret, even though they are still making a substantial profit compared to their initial cost.

Besides the anchoring heuristic, FOMO (fear of missing out) also significantly influences decisions. When a stock rises sharply, investors often worry that if they sell too early, the stock might continue to climb, and they will "miss out" on further profits. This leads many people to not sell during periods of excitement, but instead to sell when emotions become more pressured and uncomfortable. In other words, the decision to sell at that point is no longer solely based on an investment strategy, but rather to alleviate psychological pressure.

It is important to remember that even investment experts and professional funds cannot consistently predict the exact market 'peaks' and 'troughs'. Buying near the 'trough' or selling at the 'peak' is actually normal in investing. Therefore, instead of trying to find the 'perfect selling point', investors should focus on building an investment system that aligns with their risk tolerance and financial goals.

To limit regret or being overly influenced by emotions, investors can break down profit-taking into smaller increments instead of selling all at once; pre-define selling principles when buying stocks; and avoid using past peak prices as a basis for current decisions. Additionally, you can ask yourself: If I didn't own this stock today, would I still want to buy it at its current price?

Finally, investors should also note that the stock market always operates in economic cycles. During periods of abundant liquidity and bullish sentiment, many stocks can rise sharply in a short time. Conversely, when the economy enters a phase of slower growth or weakening cash flow, correction pressure often emerges. Therefore, instead of focusing solely on the price fluctuations of a single stock, investors should also observe interest rate trends, economic growth, market cash flow, and the current position within the economic cycle.

Characteristics of investment channels according to economic cycles. Source: FIDT

Some investors choose a longer-term approach through methods like accumulating stocks, open-ended equity funds, or ETFs to reduce the pressure of constantly having to "buy the trough - sell the peak" while still ensuring good long-term returns. By adopting a long-term cyclical view and diversifying their portfolio, investors' psychology tends to be more stable and less influenced by short-term emotions.

In the stock market, the most challenging aspect is often not finding a rising stock, but maintaining composure when emotions become entangled with profit fluctuations.

Lai Thi Thanh Nga

Financial Planning Specialist

FIDT Investment Consulting and Asset Management Company