Investing with Emotions

Investing in the markets is not suitable for everyone.One should have a strong stomach when markets dive and not get carried away with greed when markets soar.The following chart shows the various stages of emotions that most investors experience with investing in equities:

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Source: Emotions and markets, Global Investor, Credit Suisse

A classic example of the above scenario occurred in 2009. After declining heavily in 2008, stocks bottomed out in March 2009. Seeing their portfolios crushed, some investors sold out in March and then regretted that decision when markets around the world staged a powerful rally.

The following chart shows the 5-year performance of Canadian Pacific (CP), a railroad in Canada and the S&P 500:


Disclosure: No Positions

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