Managing Your Stock Market Psychology

In theory, investment decisions should be calm, rational, and supported by careful research. But that’s just not how human nature works. When markets go wild and the value of your life savings changes overnight, it’s hard not to get emotional. These emotions can lead to some costly mistakes.

stocks are unusual because people want to buy more and take more risk when prices are up, and less when prices go down,” says Michael Finke, professor of wealth management at the American College of Financial Services in King of Prussia, Pa. “It’s the opposite of how we deal with buying other products.” If buying high and selling low sounds like an unprofitable investment strategy, it certainly is.

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