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How Fear and Greed Can Affect Your Investing

Financial Markets are driven by emotions: Fear and Greed

fear and greed in financial markets

Master your investing emotions, or they will master you

The stock and bond markets are driven by four primary motivations. These four motivations are based on only 2 emotions, fear and greed. Investing is scary if you don’t know what you are doing. It is even scarier if you fully understand the risks through your own experience. Fear is a primal and instinctual emotion. Fear has kept our species from getting eaten by sabertooth tigers and jumping off cliffs trying to fly like a bird.

However when it comes to investing, that same primal instinct clouds the judgment of an otherwise rational educated person and causes him or her to make silly mistakes. In order to be successful as an investor, that fear has to be understood and harnessed in a productive way. I find fear to be the trickier of the two emotions because most people don’t understand how it applies to their own psychology.

Fear: The two fears of investing

The emotion of fear when investing can be broken down into 2 subcategories: Fear of losing money, and fear of under-performing the market (or more commonly known as, the fear of under-performing your friends).

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The Stock Market Crash 2015 – 9 Stock Market Tips to Help You Sleep at Night

 

2015 stock market crash

“We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful”

-Warren Buffett

Stock Market Crash 2015 – Should you be scared?

stock market crash 20152015 has been an interesting year for stock investors. 2015 started out with the S&P 500 opening at 2058.9. From there the index has fluctuated between +3.8% and -4.1%. When investors are accustomed to getting 6 years in a row of positive gains, it is hard to imagine what a down year looks like. In the past week the S&P 500 is down about 10% as of this writing. Should you be scared?

Maybe. But it really depends on what you are invested in and how it is structured. If this recent 10% drop is causing you to lose sleep, then you need help.

Here are 9 tips for helping you bring your portfolio to your sleeping point.

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