REACTIVE INVESTING IN A MARKET CIRCLE
The idea behind investing is simple: buy low and sell high.
Insert irrational, emotional human beings and things get a little more complicated.
When we allow emotions to impact our investing, leading to reactive decisions instead of staying steady, the opposite becomes our mode of operation- buying at high prices and selling low. Now that sounds like a terrible investment strategy!
The 2008-2009 global market downturn is a great example of how emotions can destroy investing. As the market took a downturn, a cycle of fear and greed began to drive investor decisions. Some investors were fleeing the market in early 2009, right before the market rebounded! They locked in their losses and experienced the intense stress of watching the markets climb again.
Emotions were the killer of investments, not the movements of the market.
The market moves. It ebbs and flows, increases and decreases, but stay focused on the long-term and in the long-term you will be rewarded. It is certainly hard to stay disciplined through rising and falling markets, but it is imperative that you don’t let your emotions or the emotions of other investors hinder your long-term success. Emotions kill investments, so stay steady and trust in the long-run!