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Introduction to Personal Investing

The Investor Mindset

What do average investors do that decreases their returns?

Many investors buy investments when markets are at their highs, and panic and sell their investments when prices are at their lows. This happens because these investors do not understand that they “are” the markets, or at least participants in a rather large way in the markets. As more stories fill the airwaves and Internet saying the market is at an all-time high (meaning prices of investments and demands are high), these investors buy stocks, mutual funds, and other investments. And when the opposite happens—when prices fall, demand decreases, and stories fill the airwaves and Internet saying a crash is happening—these same investors sell at precisely the wrong time. The markets may be depressed compared with an over-inflated price before. So some investors see crashes as great opportunities during which to invest. These same investors see market highs as when prices are peaking, and sell when everyone else is buying.



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