Today, i wanted to touch upon a subject that impacts all investors, regardless of experience. As is the case in a great deal of investment interactions, behavior shapes the way we make decisions.
The mind can be a deceptive, and disruptive instrument in the investing process, if emotions are not culled to a certain extent. It can make you suffer from ‘Fear of Missing Out’ if the market is rallying and you can’t justify buying at those ever increasing valuations.
Get this: Market rallies don’t have to make sense.
Financial markets can remain irrational far longer than you can remain solvent. Sometimes, the trend is your friend, but don’t get caught in the later cycle of the trend, expecting it to continue indefinitely.
Markets typically always encounter what is known as ‘reversion to the mean’. This follows on from the idea that markets are voting machines in the short-run, and weighing machines in the long run. The only issue is, it can take significant periods of time …