Emotional Investing: Fear and Greed😍

The biggest enemy of investment returns isn't the market—it's your own emotions. Let's understand and overcome them.

The Two Dominant Emotions

Fear

When it strikes: Market drops, bad news, uncertainty

What it causes:

• Panic selling at the bottom
• Avoiding good opportunities
• Paralysis (not investing at all)
• Selling winners too early

Greed

When it strikes: Market rises, hot tips, FOMO

What it causes:

• Buying at the top
• Chasing hot stocks
• Over-concentrating in winners
• Ignoring risk

The Emotional Cycle of Investing

Most investors experience this cycle:

1. Optimism — "This looks good, I'll invest"
2. Excitement — "It's going up! I'm smart!"
3. Euphoria — "I can't lose! Let me buy more!"
4. Anxiety — "Wait, it's dropping..."
5. Denial — "It'll come back, I'll hold"
6. Fear — "What if it keeps dropping?"
7. Panic — "I need to sell before I lose everything!"
8. Capitulation — "I'm out. Never again."
9. Depression — "I lost so much money..."
10. Hope — "Maybe I should try again..."

The problem: Most people buy during euphoria (high prices) and sell during panic (low prices). Exactly backwards.

Common Emotional Mistakes

1. Panic Selling

What happens: Market drops 20%, you sell everything The cost: You lock in losses and miss the recovery The data: Missing the 10 best days over 20 years cuts returns in half

2. FOMO Buying

What happens: Stock is up 50%, you buy because you're missing out The cost: You buy high, often right before a pullback The data: Hot stocks often underperform after becoming popular

3. Anchoring

What happens: "I'll sell when it gets back to my purchase price" The cost: You hold losers too long, waiting for breakeven The data: The stock doesn't know your purchase price

4. Overconfidence

What happens: A few wins make you think you can't lose The cost: You take excessive risk, concentrate too much The data: Most overconfident investors underperform

5. Loss Aversion

What happens: Losses hurt 2x more than gains feel good The cost: You sell winners early, hold losers too long The data: This is the opposite of what works

Strategies to Overcome Emotions

1. Have a Plan

• Write down your strategy
• Define when you'll buy and sell
• Follow the plan, not your feelings

2. Automate

• Set up automatic investments
• Remove the decision from emotional moments
• Dollar-cost average regardless of market

3. Zoom Out

• Check your portfolio monthly, not daily
• Focus on long-term goals
• Remember: volatility is normal

4. Use Data

• Let ShareValue.ai scores guide you
• Make decisions based on fundamentals
• Ignore short-term noise

5. Sleep on It

• Never make big decisions in the moment
• Wait 24-48 hours before acting
• Emotions fade, logic remains

When Emotions Are Useful

Not all emotions are bad:

Healthy Caution

• Avoiding stocks you don't understand
• Not investing money you need soon
• Recognizing genuine red flags

Appropriate Excitement

• Enthusiasm for learning
• Interest in great businesses
• Motivation to research

The key: Use emotions as information, not as decision-makers.

Next up: Value traps—when cheap stocks are cheap for a reason.