By Sterling Xie. Edited by Swastik Patel
Overview
Stock and asset trading and purchases (high finance) are often seen as a largely logical game or system, but what many don’t realize is the reality of the game. Stock trading is deeply emotional. In reality, it is nearly impossible to predict market cycles. Even the best of the best investors can’t reliably predict or time the market for every stock they purchase because the stock market itself isn’t reliable.
Emotional Trading
Trading is all about our threshold of risk. How much would you have to lose before you sell a stock? This threshold is different for every person and when you invest a lot of money into the stock market, decisions like this could make or break your financial future. As such, it’s important to understand how to act fast and understand your thresholds. The harsh reality of trading is that stocks often crash (usually in bear markets). Bear markets are when stock prices consistently are declining. Being strict on yourself and understanding how much risk you are willing to take before selling is critical.
Even when stock prices are going up, understanding the risk you are willing to take—how long you are willing to bet on the stock price continuing to rise before selling—is important. Indeed, the entire stock market itself is an emotional game. The most important takeaway is that you need to try your best to unattach your emotions from stocks and diversify your portfolio to have an average, long-term growth.
Ethical Standard
High finance is often associated with unethical business practices and to an extent, it is true. Many times, the average worker is pushed to make the most profit possible for a company and as such, resort to gray area conduct. Whether it be in mutual funds or pension funds, workers can often financially manipulate or corrupt the system, which ultimately provides additional benefit for managers.
However, in the vast majority of situations, high finance follows strict ethical standards. While the average worker is often still harshly under-compensated in comparison to fund managers and other higher-ranked people, high finance represents the backbone of the global financial system. From mergers and acquisitions (M&A) to the stock market, high finance represents the financial transactions that make the entire financial system possible in the first place.
Conclusion
High finance has been and nearly always will be deeply rooted in the reality of financial markets today. Although high finance seems to have horrible implications, it’s also important to remember the merits of the system and its importance to all our financial wellbeing.
