Before we get to know the concept of market euphoria and its importance to the investor, I would like to recall the Almighty’s saying in Surat Al-Isra:

وَلَا تَمْشِ فِى ٱلْأَرْضِ مَرَحًا ۖ إِنَّكَ لَن تَخْرِقَ ٱلْأَرْضَ وَلَن تَبْلُغَ ٱلْجِبَالَ طُولً

Many commentators mentioned that the noble verse discusses the subject of arrogance, and this is an important angle, but what I would like to refer to is the description of the state that accompanies arrogance, which is “walking on the ground cheerfully”, which I think is meant by the feeling that an individual gets when he is in a “euphoria” stage that leads him at that time To gradually grow up without knowing.

Euphoria is a great state of joy, happiness, and psychological comfort, in which the individual lives in a phase free from worries, responsibilities, and safety. This condition can be in the form of a reaction to a happy event or a result of the use of stimulants and medications or a specific mental illness. (identified from multiple sources)

What is market euphoria and when does it occur?

Market euphoria is, in fact, the euphoria of individuals, and it often occurs almost collectively when a bubble occurs in the market, especially among new investors, but it also occurs among old investors or even experienced fund managers and financiers.

During the market euphoria, a wave of general investors’ disregard for the basic rules of investment is noticed because they achieve profits by simply buying in the market without a strategy. On the personal level of the investor, his euphoria encourages him to be less cautious and more willing to take risks gradually, even in investment products that he does not understand, and this matter is reflected On the market, investment products appear that ignore the basic rules of the markets due to the increased demand for them by investors.

This situation will continue until the liquidity bubble ends

How do you act in such cases?

If you are an old and experienced investor, there is nothing wrong with allocating part of the portfolio to take advantage of this temporary wave, but if you are a new investor, it is better to adhere to traditional investment methods in order to avoid being among the herd of the market that is always exposed to loss, and if you insist on investing in this In non-traditional investment tools, it is safest to seek the assistance of a financial advisor or portfolio manager licensed by the Capital Market Authority.