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12 Ways The Stock Market Emulate Real Life

The stock market is one of the best investment instruments available today. Decades ago, you had to have an actual man on the trading floor making trades for you. Today, you can trade stocks anywhere around the world.

With just a click of a mouse or a tap on your phone, you can buy and sell stocks, provided you have an Internet connection.

Like what I usually write, we do so many things that will show a semblance of life. Here are 12 ways the stock market emulates real life.

1. There will be ups and downs.

Chart of PSEi from 2016 to 2021 via Investagrams

The stock market will always move up or down. As far as the charts will show, the stock market has permanently moved in either upward or downward motion. It can also move sideways, but the general trend will always be up or down.

Similar to life, there will always be ups and downs. Just be prepared for the downs and celebrate the ups. Life is a long journey, and as soon as we recognize this reality, our perspective will be clearer.

More importantly, whether we are on our highs or our lows, we need to look up to God and thank Him for all the blessings and trials that we had along the way that shaped us into who we are today.

2. There will be seasons when everything is going great as if nothing will ever go wrong.

If you look at the stock market charts, there are seasons of upward momentum. This is what is called a bull run.

During the bull run, almost every stock you buy will go up, making money relatively easy to earn.

However, as stock traders, we know that the market moves in cycles and will eventually move down again, so we need to be prepared.

Like life, there are months or years when everything we put our hands on is succeeding, and we feel like nothing can stop us. This feeling of invincibility also causes many to be prideful and egotistical until a downturn.

3. There will be seasons that may feel like a never-ending downfall.

Like how the market can move up and up, part of the market cycle is the down cycle. This is called a bear run. During a bear market, almost every stock is going down, and making money is very hard.

Similar to our life, there will be times when we will feel that nothing is going right, and almost everything is an ongoing trial. But keep the faith; the problems will eventually end.

4. Sometimes, it will feel like your life is going nowhere.

There are three general trends in the stock market, uptrend, downtrend, and sideways. If the trend is sideways, it would feel like nothing is going on. However, this can only be a consolidation for the stock market to go higher or lower.

ALI 2016-18 Chart via Investagrams

Like in life, it may feel like we are just stuck in a sideways direction, and nothing significant is going on. We may feel like we are just running a routine day-in and day-out until we retire. But take heart because it will eventually break out.

The important thing is to do what you can today, with the resources that you have, so that your breakout will be upward.

5. You need to wait for a proper setup. Do not force your trades.

One of the things that were reinforced in my life through the stock market is patience and discipline. Waiting for the stocks that you’ve been watching to enter your trading criteria is crucial – a lesson that has been taught to me time and time again.

Whenever I ignore some of my criteria when buying or selling stock and am forced to trade, it usually ends up in a loss.

In life, we need to understand that patience is crucial. We can’t force everything that we want. More often than not, we will have to wait longer before getting the result that we hope to obtain. We just need to do our part and actively wait.

6. You will be undervalued. You just need to wait for someone to notice your worth.

For the fundamentalists in the stock market, the primary consideration for buying or selling a stock is its fundamentals, such as profitability, revenues, assets, and liabilities.

A company may consolidate for a while before entering the “right” price before fundamental analysts start buying them. There will also be times when a company has solid fundamentals but is still going down in price.

Just like in real life, you may sometimes be undervalued by the people around you, like your family, friends, partner, or bosses. But if you just wait, someone will come your way and notice your worth and invest heavily in you.

7. There will always be risks. You just need to know which ones are worth taking.

Risk is inherent in the stock market. You just have to do your part to try and manage it. As the saying goes, the higher the risk, the higher the reward.

So a common practice is to have a reward/risk ratio greater than 3. For example, in every P100 you risk, you should have at least P200 as a possible reward.

Similar to life, it is impossible to move up in our careers without risking anything. Even for people who became complacent, they still risked something.

We need to identify which of our choices will have the best rewards and know which part of our lives we are willing to risk.

8. The stock market is not for the short run. It is for the long haul.

One of the biggest misconceptions of people regarding the stock market is that it is a get-rich-quick scheme, which for many people who tried to venture into this investment vehicle, will beg to differ.

The stock market is a great equalizer where people of all backgrounds can participate. You just have to endure the trials that will go along with it.

The great things in life are those we are willing to hold on to for as long as possible, be it a relationship, career, or passion. Just like an old saying goes, life is not a sprint; it is a marathon.

9. There are many opportunities. You just have to know where to look.

The stock market is full of opportunities for those willing to give in the hours and study it for life. Though the Philippine Stock Exchange (PSE) is relatively smaller than the other stock markets worldwide, opportunities will still come along.

There are so many success stories that were achieved by people who endured the learning curve of the stock market.

In our life, there are also so many opportunities that are available to us. We just have to be ready when it appears. So, while waiting for the right opportunities to come, we need to do our part to grow where we’re planted and recognize once the chance we are looking for presents itself.

10. Check your ego.

If you’re a trader in the stock market, the goal is to maximize your earnings when you are right and cut your losses when you are wrong.

However, so many investors keep holding on to their losing positions even though there are already other opportunities presenting themselves.

So what is the problem? EGO. 

Many people keep holding on to their stocks because they don’t want to be wrong. They would instead take the paper loss, thinking that it will eventually go up. But what if it doesn’t?

In real life, we must always check our egos. We must be humble enough to accept when we are wrong. 

11. Learn to cut your losses.

One of the essential skills to learn as a stock market trader is to cut your losses because it preserves your capital. Failing to learn to cut your losses can be detrimental to your trading psychology in the long run.

Think of it this way, Cemex ($CHP) was trading at around P13.50 per share during its initial public offering (IPO). Today, it is only trading at less than P1.30 per share. That is almost 90% loss.

If you’ve invested P100,000 in CHP, that would only be P10,000 today. And to reach the break-even point, your P10,000 should gain 900%.

In real life, we may not cut everything in our lives, but the important thing is to know when to let go. Letting go can sometimes be necessary for our personal and professional growth.

12. You always have to look at the bigger picture.

Sometimes, the charts will show a slight uptrend, only to reveal that it is still part of a more significant downtrend.

On the other hand, the charts will sometimes show a small downtrend, but it will show a general uptrend when you zoom it out.

In life, we may feel that we have setbacks after setbacks. It may also think that nothing good is happening in our lives, but if we zoom out in what happened in the past years of our life, we may be surprised to know that we are still moving higher and higher.

Final Thought:

The stock market is a great equalizer. It offers new opportunities which were unavailable to the past generations.

The only problem would be on us. Are we willing to participate in it and go through the trials of learning? Or are we complacent with the usual 9-5 hours? The rest is up to us.

So as we view the stock market as a representation of life, we will always see wins and trials. We need to trust God and always look up because He will never leave us nor forsake us. Keep the faith.

What are your personal anecdotes from the stock market?


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