You may have heard that it’s important to take the emotions out of investing. But is this true for all emotions?
Certainly, some emotions can potentially harm your investment success. Consider fear. If the financial markets are going through a down period – which is actually a normal part of the investment landscape – you might be so afraid of sustaining losses that you sell even the investments that have good prospects and are suitable for your needs.
Greed is another negative emotion. When the financial markets are rising, you might be so motivated to “cash in” on some big gains that you will keep purchasing investments that might already be overpriced – and since these investments are already expensive, your dollars will buy fewer shares.
In short, the combination of fear and greed could cause you trouble.