Perception and your finances – the truth about the “October Effect”

As we globally face the challenges COVID-19 has forced onto our lives, it is more important than ever to remind ourselves of our own limitations. In doing so, we become better equipped to make appropriate money decisions.

Uncertainty can bring about fear – a bad advisor that can work against your financial goals. This is why investment solutions provided by Iban Wallet are designed with stability in mind, aiming to counteract potential rash decisions triggered by any number of anomalies, including the “October effect”.

It bears reminding that the human brain is capable of fantastic achievements. It”s what has enabled us to continuously improve with a deeper and deeper understanding of how all is tied together.

However, and by definition, if we are able to deepen and perfect our image of reality, it stands to reason that what we hold to be true is actually an approximation. This perception can be more or less accurate, and more subjected to emotion than we tend to acknowledge.

From observation, we create assumptions, some of which can deeply impact all areas of life on a global scale (consider, for instance, all that we know about fake news).

Finance is no exception to these vulnerabilities of the human brain. After all, even in the digital age, finance is nothing if not human. It”s the reason why speculation and market bubbles occur – human beings observe current conditions and conclude that value can only go up.

On the flip side, we can find phenomena such as the October Effect – the perception stock markets tend to experience a decline during this particular month. Again, we have observations to thank for this. Specifically, historically famous declines from the Bank Panic of 1907, the Wall Street Crash that spearheaded the Great Depression, and the Black Monday of 1987.

A wider analysis, however, demonstrates that this is not supported by historical data. In fact, September has seen more market downturns than October. However, the impact of big events can have a distortion of sorts on our collective memory. And while this calendar anomaly seems to be declining in effect (with the dotcom crash and the financial crisis of 2008-2009 taking a more prominent role on our minds), it is a good reminder that there are many irrational forces at play.

And in times of a global pandemic, this should not be underestimated, as the ups and downs of the stock markets make volatility to the news cycle a real and present concern.

For this reason, solutions that strive for stability are growingly important. After all, to make plans, there is a minimum level of certainty required.

This is our aim at Iban Wallet. To work for our clients” financial future in such a way that they are able to plan it, be it for the shorter or longer-term, with solutions ranging from no term at all to 5 years. And particularly for times like these, term investments for 30, 90, and 180 days.

Iban is an online marketplace that offers investment opportunities at a projected interest rate derived from investment in loans from various lenders

Iban Wallet
Sigrid Arteaga
Christburgerstr. 23
10405 Berlin

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