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Investor emotions part 3: Remorse

As I’ve discussed in previous articles, the two most significant negative emotions for investors are greed and fear. Either one on its own can lead to people losing money, but more often than not they are combined in an elegant double-whammy that hits some amateur investors so hard that they leave the market with their tails between their legs and never come back. Greed leads them to invest more than they can afford to lose, while fear encourages them to change their strategy on the hoof, without rationally considering the circumstances and the consequences of their decisions, thereby increasing the chances that they will lose. The result is remorse, an emotion that can be either negative or positive:...

posted on: Nov 5, 2007 | author: Alex

Investor emotions part 2: Fear

Fear. We’ve all felt it at some point. The ominous sound of footsteps padding along behind you as you walk back from the pub in a provincial town at 2am on a Saturday night. The realisation that your evil mother-in-law is coming to dinner and you’ve forgotten the steak (not to mention the garlic and holy water). The awareness, halfway through a trans-Atlantic flight, that you’ve left the gas on. The soft ‘click’ as you wake up from your sleep-walk and realize that you’re standing naked in the hotel corridor and the door to your room has just locked itself. Fear. It’s that stomach-dropping, bowel-loosening moment when you realise that you’re about to suffer a deeply unpleasant experience...

posted on: Oct 30, 2007 | author: Alex