What is the cycle of market emotions?

Many investors, especially the many new and/or less experienced investors without training, feel excitement and a sense of confidence about the future when the market rises and their account balances go up. People who’ve had mixed experiences with investing in the past often wait until the market has risen to invest again. When the market’s natural cycle (the timing or length of which can’t be determined in advance) shifts to a downturn, many investors get nervous and some panic, selling their stock investments. This emotional cycle can be very damaging to people’s financial independence or retirement goals. If one waits for the market to go up before investing, they will have missed the rise. If they panic when the market goes down, and get out of the market, they will miss the recovery. The most successful investors are aware that the market has cycles and that they should simply stay in an asset allocation consistent with and appropriate for their life stage, without investing emotionally. Successful investors feel discomfort too, but they react to it differently. They are disciplined, stick with their strategy and almost always end up with better results in the long-run. View WealthStep’s Financial Independence video to help you convert from a new or inexperienced investor to a disciplined, sophisticated investor.