The emotional market roller coaster

bull bearEmotions about the markets are the opposite of what potential returns and risk of the markets are. Emotions run hot and high when the markets are up … often called greed. Getting from a high price (markets are up) to an even higher price (markets are up more), and thus a return, is harder when the markets are near their peaks. The returns have been missed since the markets where lower.

And the emotions of a low market are fear. Yet, the returns tend to be the greatest when getting in while fearful and experiencing a recovery. Now, getting in while a specific stock is low is risky because that stock may be low for a reason and go even lower. However, investing in indexed funds reduces the company risk and leaves one with just systemic risk, which can be further diversified by investing in different “systems” (in other words, globally).

Note: although the numbers for the indexes change minute by minute and close differently day by day, you get the point … invest because of your goal, not because of the market and your emotional reaction to it.

Original blog that lead to this article.

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