Keep Your Head and Control the Emotions of Greed and Fear

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Keep Your Head and Control the Emotions of Greed and Fear

by | Feb 2, 2016

In times like these of market volatility, it’s easy to imagine the sum of all fears and let our emotions dictate our investing decisions. Historically, markets have trended upward over time, but not always on a smooth slope. As long term investors, we understand that periods of high volatility, while uncomfortable, can be expected.  More importantly, short-term turbulence can present opportunities to add value over the long term.
​While there are some headwinds facing the markets, long-term investors should remember that it’s normal to see pullbacks of this magnitude during bull markets. In fact, we’ve seen the S&P 500 correct by at least 14.7% five times since 2000, only to eventually make its way higher. The short-term interruptions in the markets can present attractive buying opportunities for long-term investors who have a well-diversified plan in place

Here’s a timely and wise quote from Howard Marks of Oaktree Capital:

“Especially during downdrafts, many investors impute intelligence to the market and look to it to tell them what’s going on and what to do about it. This is one of the biggest mistakes you can make. As Ben Graham pointed out, the day-to-day market isn’t a fundamental analyst; it’s a barometer of investor sentiment. . . . You just can’t take it too seriously. Market participants have limited insight into what’s really happening in terms of fundamentals, and any intelligence that could be behind their buys and sells is obscured by their emotional swings. It would be wrong to interpret the recent worldwide drop as meaning the market “knows” tough times lay ahead. . . . It’s important to understand for this purpose that there really isn’t such a thing as “the market.” There’s just a bunch of people who participate in a market. The market isn’t more than the sum of the participants, and it doesn’t “know” any more than their collective knowledge.”

​The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Thomas Fleishel and not necessarily those of Raymond James. Opinions expressed in the attached quote/article are those of the author and are not necessarily those of Raymond James. All opinions are as of this date and are subject to change without notice. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Diversification does not ensure a profit or guarantee against a loss. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor’s results will vary. Past performance does not guarantee future results.


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