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Emotions can derail rational investing decisions from "summary" of The Joys of Compounding by Gautam Baid
Investing often requires a level of detachment, yet human emotions can create significant obstacles. Market fluctuations can trigger fear or greed, leading to impulsive decisions that deviate from a well-thought-out strategy. During a market downturn, panic can set in, prompting investors to sell at a loss instead of adhering to their long-term plan. This reaction not only crystallizes losses but also undermines future potential gains. Conversely, during a market upswing, the allure of quick profits may lead to overconfidence. Investors might chase high-flying stocks without adequate research, driven by an emotional high rather than rational analysis. Such behavior can inflate bubbles, culminating in inevitable corrections that catch many off guard. Ac...
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