Singapore stocks have had a remarkable run, with the Straits Times Index crossing 5,800 for the first time in early September.
Retail investors have piled in too, and the Singapore Exchange says retail trading activity hit a 12-year high.
For many, these are their first shares, so the first real dip will also be their first real test.
It’s a scenario I’ve come across often: a brand-new investor buys into a stock everyone’s talking about.
A few days later, it dips, maybe 5 to 10%, without any clear reason why. Seeing red is uncomfortable enough that they will sell. It’s a small loss, but at least it feels resolved.
Then the stock stabilises, and sometimes it goes on to new highs.
This is a familiar pattern for most beginner retail investors, and it isn’t a reflection of intelligence. It comes down to how we are wired.
Investing is often treated as a numbers game of spreadsheets, ratios, and charts.
But the decisions behind the numbers are shaped just as much by emotion. Fear and greed tend to be baked into how we process gains and losses.
Part of the reason is loss aversion. Losses tend to hurt more than equivalent gains feel good.
This instinct sits deep enough in our psychology that it quietly shapes decisions we believe are purely rational.
Source: Courtesy of James Ooi
Once the patterns are named, they become easier to notice, including in one’s own trades.
1. Disposition effect
This is essentially the tendency to sell winners too early and hold losers too long.
It feels sensible to lock in the win and wait for the loser to recover. But taking small profits repeatedly while letting losing positions run means the best ideas get sold too early, while the worst ones gradually weigh down the portfolio.
Say an investor bought Stock A and Stock B at S$10 each. A is now S$18 and B is S$6. They sell A to lock in an S$8 profit and hold B, which is down S$4, hoping it rebounds.
Months later, A is at S$30 and B is at S$3 — the winner is gone, while the loser remains.
2. Anchoring bias
This happens when one becomes mentally fixed on a specific number, usually the original purchase price, and continues to use it as a reference point long after it stops being relevant.
A stock bought at S$100 falls to S$40, and rather than trying to understand what made the price drop, the focus shifts to it being “60% cheaper” and therefore a bargain.
In reality, the company’s business outlook may have deteriorated enough that S$40 may simply be its new fair value.
3. Maslow’s Hammer
This refers to an overreliance on a familiar tool. It is the idea that if all you have is a hammer, everything looks like a nail.
In investing, this means sticking with one strategy whether or not it still fits.
Someone who profited from “buying every dip” during a bull market (i.e., when prices are broadly on the rise) may continue doing it even after the environment has changed, until the same strategy starts working against them.
Source: Courtesy of James Ooi
Alternatively, the quieter approach is staying invested, contributing consistently, and not attempting to perfectly time entries and exits.
It is, admittedly, less exciting, but it sidesteps most of the traps above, largely because there are fewer high-stakes emotional decisions to get wrong.
The value of spending time in the market, rather than trying to time it, lies in removing the guesswork of predicting short-term moves that few can call consistently. It also helps to understand one’s own instincts when the markets fall.
Optimistic investors tend to treat downturns as an opportunity, staying close to fully invested and accepting more short-term pain for better odds of catching the recovery.
Pessimistic investors instead hold more cash on the sidelines, prioritising a sense of safety over potential benefits.
Neither instinct is wrong, but knowing which one tends to surface ensures that judgement drives decisions, especially when the market gets noisy.
Source: Courtesy of James Ooi
Emotions cannot be switched off entirely, but what helps is building small habits to give them less room.
The most important thing is having a plan before investing, rather than improvising after a stock has already moved.
In such cases, technology can play a genuinely useful role. AI-powered investment assistants, like TigerAI, are built to surface information tied to what’s actually in an investor’s profile or watchlist, rather than whatever happens to be trending.
It functions as a guide to help investors stick to their own plans.
Remember your biggest obstacle in investing is frequently yourself, not the market. A few things I’d encourage every new investor to hold onto:
1. Your biggest enemy is frequently yourself, not the market. Most losses trace back to emotional decisions, not bad luck.
2. Have a plan before you invest, not after something moves. Work out your reasoning and exit points before the storm hits.
3. Consistency beats cleverness. Boring, unglamorous investing – i.e., showing up regularly and staying the course – tends to win over time.
It won’t make for an exciting story, but if your goal is to build real wealth, boring may well be the smartest strategy.
James Ooi is a market strategist at Tiger Brokers, a leading global online broker. With almost two decades of experience in the financial industry, James is a regular market commentator for various media programmes in Singapore, where he shares his analysis of the latest market trends.
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Featured image courtesy of James Ooi and Towfiqu barbhuiya on Pexels for illustration purposes only.