When Math and Emotion Collide

In my previous Discount Rate is not Markup Rate post, I explained how the mark-up rate is always higher than the discount rate. This point is crucial when it comes to investing.

Say a stock price has dropped in value from RM10 to RM5. If you were to purchase the stock at RM5, it simply means you are buying it at a 50% discount. And assuming in the future, the stock price rises back to RM10, you would have gained a 100% return.

RM10 to RM5 = 50% discount
RM5 to RM10 = 100% return

On paper and based solely on simple mathematics, it is a no brainer to invest when the market is down. However, it is not that simple when our emotions interfere with our judgment during a market downturn. In this post, I’ll share what I went through emotionally from middle February till late March 2020, during the height of the market downturn due to the COVID-19 crisis.   

Mid February – late March 2020

The global stock market took some beating from 20th February onward and was at a downward trajectory till around 23rd March. They were down by 20% to 30%, maybe more. As an investor, I have never experienced a drastic downturn in such a short space of time. As stated in this post, I was down by RM28K in a month. It was scary but at the same time, it was also an investment opportunity.

The above image was shared in one of my WhatsApp groups. It illustrates how the world market performed in the short-term period during an epidemic (not pandemic). Overall, it points to long-term growth. So, based on simple math and history, I should be capitalizing on this opportunity. Yet for days there was a constant struggle to either invest or not.  Emotionally I was not comfortable doing it.


Citizens of the world were falling sick and dying due to the COVID-19 pandemic. No previous epidemic forced businesses to be partially closed and citizens to be quarantined. None of these events point to a healthy world economy. If the economy is poor, how can I expect a positive return from my investment?

On top of all these, I was also worried about my job security. Almost all sectors in the world economy will be affected by this pandemic. Some of my friends and family members from different industries were asked to take a pay cut for three to six months. Some were even asked to leave.


“Investing is not the study of finance. It’s the study of how people behave with money.”

Morgan Housel

All these made one thing clear to me. My main concern during this tough period should be survival. To survive, I need cash. As it is already a stressful period, the last thing I need now is to enter an investment which can end up being more stressful if it turns sour. I don’t really need additional stress at this moment.    

In the end, I made the following decisions and I’m happy and comfortable with them.

1. Since too much uncertainty now, I’ll save more money wherever possible.

2. Stick to my existing long-term investment objective.

3. I’ll gladly pass this investment opportunity. I’m in no rush.

4. If the future looks brighter and I’m in a stable position, I will then invest the money saved.

I’m sure there will be more ups and downs and opportunities presented in the future. Maybe the next time I’ll be better prepared. Hopefully, with excess cash and getting both the math and my emotion aligned, I’ll be able to capitalize.

End Note

I had the knowledge on how to deal with a market downturn, but knowledge alone is never sufficient. Experiencing it is something else together. “Should I hold, sell, or invest more?” I’m glad to have this experience as I learn a lot about myself during this episode, especially on my investment temperament. Both math and emotion matter for investment.

In a way, I’m glad I saved more money. During this MCO, I had to buy a new fridge and spent some significant amount of money fixing broken stuff at home.