Tuesday, October 12, 2010

The Sleep Test

Contributed by DareToAct
When looking at an investment, most people think only about the upside. Very few consider the downside.  


Most think about what they can do with the profits (potential). "Upgrade car", "vacation", "kids education!". Seldom they think of whether they can stomach the downside.  And when the market disappoints and mark-to-market losses get bigger, they start to lose sleep and fear begins to build up. Long term investment view suddenly shortens and investors suddenly realize they are more risk averse than they belief themselves to be.  They sell their investments and realize the losses.  


They stay away from investing in the stockmarket until the next bull run, when their friends and families good fortune nudge them back into the market.

DareToAct
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1 comment:

ron said...

Yet we need these people.
They help add froth to the market.

The weak, the handicapped, the less intelligent all have a place and contribute to the entire whole.

Imagine a stock market, or any market where buyers are very wise and astute... holy cow.. !!

We would not have a society al all.

October 12, 2010 10:06 AM

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