Most new and seasoned investors make the same mistake with their money over and over:

They buy high out of greed and sell low out of fear.

At the top of the market, investors can’t buy fast enough. At the bottom, they can’t sell fast enough. And investors repeat that over and over until they’re broke.

Can you imagine doing this in any other setting? Imagine walking into an Audi dealership and saying, “I need a new A6.” The salesperson says, “Oh my gosh, you’re in luck, we just marked them up 30%.” And you say, “Awesome, I’ll take three!”

Investors are hardwired to get more of what gives us security and pleasure, and run away as fast as we can from things that cause pain. That behavior has kept people alive as a species. Mix that with investors desire to be in the herd, the feeling that there’s safety in numbers, and you get a pretty potent cocktail.

(FOMO – fear of missing out):  When everyone else is buying, it feels like if you don’t join them, you’re going to get eaten by the financial version of a saber-toothed tiger.

But it doesn’t take a genius to see that this behavior is terrible for individuals when it comes to investing.

Source:  Carl Richards, How fear and greed kill returns