Quote for the Week
The pendulum of investment psychology is constantly fluctuating between optimism and pessimism, between greed and fear, between credulousness and skepticism, between risk tolerance and risk aversion. It will always swing, and it is the presence of optimism, greed, credulousness, and risk tolerance that makes markets most dangerous…
One of the first lessons I heard about pendulums and the swing of investor behavior regarded something I was taught in the early 1970s: the three stages of a bull market. These succinctly capture the essence of investor psychology.
The first stage comes when a few people begin to realize that there will be improvement. The second stage occurs when most people realize that improvement is already taking place. The third stage comes when everyone thinks that things will be getting better forever. Clearly, the first is early; the last is laughably late. One of my favorite adages – perhaps my favorite of all – is that what the wise man does in the beginning, the fool does in the end. So it’s the buyer in the third stage – who buys when optimism is incorporated, under the assumption that things will always get better – who pays the price. — Howard Marks (source)
From the Archives
Last Call
- For Richer, For Poorer: 37 Years of Compounding – Humble Dollar
- How to Build a Portfolio You Don’t Have to Babysit – C. Benz
- Past Performance is No Guarantee of Future Results – TKer
- Bull Markets Climb a Wall of Worry – The Sandbox
- Investing is Not a Game of Perfect – MicroCapClub
- The Voluntary Blindness of Modern Finance – M. Higgins
- The Pace of Technological Change – Past Present Future
- How Long Do We Wait for New Inventions? – Construction Physics
- Why You’re More Likely to Buy Something for $4.99 than $5.00 – The Hustle
- The Ethiopian Running Secret – Aeon