Learning the psychology in financial management

Investment and financial management are actually a kind of psychology game. No matter what investment you make, you should understand the psychology in financial management. These psychological effects will have a great impact on our investment behavior.

#The Butterfly Effect

The butterfly effect in economics refers to the compounding impact of small changes. This effect shows that the development of everything is fixed and variable, and a small change can affect the overall situation.

Do not ignore any small aspect of the investment policy, it is likely to have a great correlation with your investment, it may also affect your economic trend, and even affect your investment income.

#Crocodile rule

Suppose a crocodile bites your foot. If you try to break free from your foot with your hand, the crocodile will bite your foot and hand at the same time. The more you struggle, the more you get bitten. Your only way to escape is to sacrifice that foot.

When you find that your investment has deviated from the direction of the market, you must stop the loss immediately, without any delay. If you decide to take a gamble, it is very likely that you will lose everything.

#Sheep effect

The phenomenon of the herd effect is that where the leader goes, the others follow.

In the investment field, this effect refers to the phenomenon of investors learning and imitating in the trading process. When everyone says that a certain stock will rise sharply, everyone will blindly buy a large amount of this stock that follows the trend. Similarly, in financial investment, we must also remember not to blindly follow the trend.

#Boiling Frog Syndrome

Put a frog in the boiling hot water, it will quickly jump out of the pot. If you put a frog in a pot of cold water and heat it slowly, the frog will adapt to the heat gradually.

When the water temperature reached the frog's limit, it was too late to jump out of the pot. We tend to ignore the slow and small dangers in investment and financial management.

This small danger that we ignore is the most terrifying.

If this happens in investment, we always pay attention to the direction of investment. If we can't see the future with it, we must be decisive when we cut the meat and stop the loss.

#Catfish effect

In the past, the survival rate of sardines during transportation was very low. Someone then discovered that if a catfish is placed together with the sardines, the survival rates will improved. What is the reason?

Because the catfish destroys the living environment of the sardines, the survival ability of the creatures themselves will be stimulated to the greatest extent, so the survival rate of the sardines will increase accordingly.

In fact, any investment is risky. We must not only learn financial management knowledge, but also exercise risk control, and be vigilant at all times!

#80/20 Rule

The 80/20 rule also known as the Pareto Principle states that for most of the outcomes, 80% of consequences come from 20% of the causes.

There is also the 80/20 rule in society. Wealth is concentrated in the hands of 20% of people, while 80% of people have a very small proportion of wealth. This is the 80/20 rule.

The same is true in the financial management market. Investment and financial management are not just about making a profit. In the financial management market, there is also the 80/20 rule. Wealth is basically in the hands of 20% of people who manage financial affairs wisely.

Don't analyze, deal with, and look at problems equally, but focus and prioritize on solving the main problems.

#Segal’s Law

The Segal’s Law means that when a person has a watch, he can know what time it is, but when he has two at the same time, he cannot be sure.

Two watches can't tell a person a more accurate time, but will make the person who reads the watch lose confidence in the accurate time.

The Segal’s Law gives us a very intuitive inspiration in terms of investment. Take stocks as an example: there are too many opinions from experts, and there are both ups and downs. If you listen to the opinions of experts, you will be at a loss.

Make a reasonable analysis according to your own wishes.

#Broken Window Theory

If the window of a house is broken and no one will repair it, other windows will be broken inexplicably after a short while as it promotes more crime and disorder;

Similarly, people are embarrassed to throw rubbish In a very clean place, but once there is rubbish on the ground, people will throw it away without hesitation, without feeling ashamed.

The same is true for investment; don't always think about making money from penny stocks, this is often not making money!

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