OSTRICH-EFFECT

"I am positive", you have realized this affects many times in your trading carrier, right? It happens when your portfolio or positions are going against you.

In the trading there is pleasure and pain when we gain or lose. This pain and gain come from the fluctuation of our portfolio and we feel good when our portfolio increases and badly when loses. In other words, the up and down fluctuation of our account causes direct effect on our emotions. 78% of investor is functioning with ostrich-effect, they want to avoid the bad news and close out the negative effects.

They prefer to pay attention to their positions when they expect to see good results and gains. They are more often log into their account when the media filled by good news about the market. The analysis based on 100.000 accounts at Vanguard group, so it was a wide scale report for two years.

What we are doing at ostrich-effects, the followings:

• We don’t look as often on the account as normally because we don’t really like to see the size of the damage.
• We start to call that position a „long term” one. Honestly, I have never met any trader who doesn’t want a „short investment” with a quick profit. Who is the idiot who likes the long stressfull period waiting for the profit. 
• Ostrich-effect is stronger in men than in women.
• When the investors don’t pay attention to their portfolio it means they are trading less. In some cases protect them from bigger losses and doing more stupid things like get-in get-out frustrated trading style. Ostrich-effect helps them not overreacting the severe market drops. 
• Between ages 20 and 40 the traders are affected more by ostrich-effect.
• Males log into their accounts roughly 50% more frequently and trade 50% more than do females when is performing well, but when the account turns into trouble they tend to ignore checking the account more often than women.
• Investors should be less likely to log in and check their accounts after the news media has reported that the market went down and higher returns should induce more attention.
• Investors are more likely to log in when the market was up over the last day.

All in all we tend to close our eyes when the train is coming and just reopen again when the train is leaving again and the market and our portfolio gets back into positive track.

The BFM Assets Team.