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Understanding The Cycle of
Emotion
One reason for
investors generating such poor performance on their own could be
found in the chart below. It outlines the cycle of emotions
felt when it comes to investing in the stock market. Most people
rarely invest when they are pessimistic or skeptical about the
market because it goes against human nature. People tend to wait
until they are optimistic before buying stock. Unfortunately, this
is the wrong time to buy because prices are usually at their
highest. Similarly, people wait for all the normal emotions to set
in such as fear, panic, and finally despair before selling stock -
at exactly the wrong time.
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