Monday, 29 March 2010

Do not panic; learn the psychology

To be a successful investor, you really need to understand psychology as well as history and philosophy.  Very often emotions drive the market up or down.  Remember that economies and stock markets are two different things.  

As Paul Samuelson,l the Nobel Prize winning economists, once put it, "The stock market has anticipated nine of the last five recessions."

China's economy, for example, has been growing rapidly for years now, yet its stock market declined consistently for four years between 2001 and 2005.  The public overreacting to positive or negative news reports, will buy or sell short at the wrong time.  Investor psychology can accelerate such trends int he market.

Anybody can feel panicky.  Losing your perspective in the midst of market panic is equivalent to losing your money in that market.


Jim Rogers
A Gift to My Children

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