“If you want to have a better performance than the crowd, you must do things differently from the crowd.” Sir John Templeton.
Summary below by Anthony O'Brien
Given the opportunity to acquire a discount, most of us can hardly contain ourselves, which explains the flood of people at Boxing Day sales.
Yet faced with falling stock markets, many investors exhibit the opposite tendency.
Investment psychology is deeply fascinating. Thousands of highly-complex academic articles have been written about it, but it is hard to ignore the basic analysis that markets are driven by greed and fear.
When stocks are rising, investors are attracted by the prospect of immediate returns. ‘Greed’ may be a harsh word to describe the desire to make a profit, yet this motivation does tend to intensify as markets rise.
Conversely, when stocks are falling, it can be nearly impossible to persuade clients it’s the right time to invest. The ‘fear’ of losing money overrides any assessment of value.
The risk with trying to ‘time’ an investment is that you miss the big moves.
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