Understanding Investor Biases

• Greed vs Fear

  These are the two primary emotions driving market behavior. Greed leads to chasing returns and taking excessive risk during bull markets. Fear causes panic selling during downturns, often locking in losses.

• Loss Aversion and FOMO

  Loss aversion makes the pain of a loss feel greater than the pleasure of an equivalent gain, leading to irrational decisions. Fear Of Missing Out (FOMO) drives impulsive investments in hot stocks or trends without proper research.

• Market Cycles and Investor Behavior

  Markets move in cycles (expansion, peak, contraction, trough). Investor sentiment often mirrors these cycles, leading to buying high (euphoria) and selling low (panic/despair). Understanding this helps avoid emotional pitfalls.

• How to Build Long-Term Conviction

  Develop a sound investment plan based on your goals and risk tolerance. Focus on fundamentals, diversify, and avoid constantly reacting to market noise. Patience and discipline are key.