Managing Emotions During Market Volatility
According to Behavioral Finance, the majority of trading mistakes are made due to emotions. Such emotions can lead to panic buying, confirmation bias, memory bias, framing, crowding, overconfidence, FOMO, and fire sale. It becomes important to combine human decision-making and automated tools to invest in profitable stocks.
For high net worth individuals, there is one investment approach offered by private banks that can help mitigate fear-based investment decisions. This approach combines four main trading strategies: volatility-linked, high-yield, fixed-income, actively managed certificates; forex arbitrage; leveraged credit-linked notes; and long-leveraged upside participation notes with downside protection.
Since the majority of trading mistakes are made by investors when they are forced to buy or sell, the note products above restrict investors from active management for two to three years or until they are auto-called. This by default provides a longer investment horizon and can be structured depending on the cash-flow needs of the investor.
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