Overreactions and overthinking

We kicked off last week with a market stock decline and panic in the air. All of a sudden people had fears of a recession hitting and started selling. A week and a half later, the S&P 500 is up almost 4%.

Don’t get me wrong. There is still a possibility of a recession and more sell-offs in the future. This is the market after all. If there’s one thing I know, stocks will go down again in the future at some point.

However the overreactions to these events usually do not end well. If you had panic-sold last Monday, you would’ve missed the rally back up and left yourself in a bigger hole.

In the private markets, we often see a lot of retail investors overreact and overthink their strategies. People try to predict the future and time the market perfectly on both bullish and bearish sentiments.

The private markets do present more of an opportunity for planning based on external factors so in my opinion, it’s important to pay attention to the trends. But I often see people going all-in when things are going well, or folding completely when things aren’t going well. When you do that, you’re gambling much more than you’re planning.