Investing in the stock market: Can mental health deteriorate, how to avoid it?

 Investing in the stock market: Can mental health deteriorate, how to avoid it?

The growth of young investors in the stock market of Nepal, the entry of new stocks and digital trading have had a positive impact on economic development.

The fluctuations in the stock market have caused mental health problems such as stress, anxiety, FOMO and the follow-up effect.

The stock market is an important indicator of the country's economic development. In the last few years, there has been significant improvement in the stock market of Nepal. The increase in the number of young investors, the entry of new stocks and multi-sectors, economic growth, knowledge and participation of common Nepalis in shares, IPOs, along with the development of digital trading, has brought about very positive improvements in this sector. Efforts to make the stock market friendly policies and regulations are supporting the country's economy.

Like the stock markets of all countries in the world, the Nepali stock market also fluctuates. Political instability, natural disasters, debt, interest rates, liquidity, uncertainty of returns, lack of information and awareness, greed for quick returns, fear of loss, the mentality of common people, etc. are affecting the market. Therefore, the relationship between mental health and the stock market is linked.

The investor's mental and psychosocial health creates a kind of mental health cycle between investment decisions and market fluctuations.

The impact of the stock market on mental health:

1. Stress and anxiety

The stress that comes to the body with the fluctuations of the stock market may be natural, but lack of experience and knowledge, excessive risk-taking, or a 'get rich quick' mentality can create serious mental pressure.

Losses can create excessive thinking, anxiety, depression, irritability, anger, unwillingness to talk to anyone, sleep disturbances, or even suicide.

2) FOMO effect (fear of missing out) and Folo effect (fear of losing out)

The thought and behavior that comes when everyone is buying a certain stock, there is information that it will go up very high, or the stock has increased a lot, I have missed out on it, I will lose the profit is called the ‘Fear of Missing Out’ or FOMO effect.

The price of the stock you bought had increased but is now falling, you are afraid that it will fall even more, and if the price starts to rise again after you sell it, you may regret and feel guilty. This is the FOMO effect or ‘Fear of Losing Out’.

This kind of fear and anxiety causes mental pain. The greed for quick profits increases the possibility of buying risky stocks and increasing the possibility of addiction.

3) Stock market hang-up

You may think about the stock market all the time, watch only the news related to it, check your portfolio every time, and not feel like doing anything else. This is why you may become addicted to excessive screen use.

4) Impact on investment decisions

If a person with pre-existing mental health problems enters the stock market, it can affect the investor's investment decisions. The bad results that may occur due to this can also affect mental health.

How can investors protect their mental health?

1. Make a written investment plan.

2. Only purchase stocks after studying how long you plan to invest.

3. Identify your financial resources, the amount you will contribute to the shares, and the risk you can bear.

4. Instead of investing heavily in a single stock, managing your stocks and investing in a few stocks of your choice reduces stress and anxiety.

5. Invest only by considering the amount you need for daily expenses, interest, installments, and the amount you need if you and your family are at risk.

6. Set aside a specific time to check your portfolio, watch financial news, and information, and only watch it at that time.

7. Make sure that the information you receive is official or not. Do not waste time chasing after impulses.

8. Reconsider the decision to buy or sell shares, if you reconsider for just a few hours, you will not have to make a decision on impulse and regret it later.

9. Price notifications on your mobile or laptop can sometimes stimulate you to buy or sell shares with information. Consider this and turn off notifications when you are not thinking about buying or selling.

10. Do not make decisions when you are mentally difficult, stay away from the market for a while, and express your feelings with close friends and family.

If you experience the above-mentioned embarrassment, if you have mental health problems and are having difficulty managing them, you should immediately seek help from a psychologist or psychiatrist.