Fear and greed drive financial markets from "summary" of The Psychology of Money by Morgan Housel
When you think about it, fear and greed are the twin engines that drive everything in money. The fear of losing money is what makes people sell at market bottoms, and the fear of missing out is what makes them buy at market tops. Greed is what makes people take too much risk when they should be playing it safe, and what makes them play it safe when they should be taking risks.
These emotions are hardwired into our brains. They helped our ancestors survive in a world where danger was everywhere. But in today's world, they can lead us astray. The problem is that when it comes to money, fear and greed can cause us to do the exact opposite of what we should be doing. We should be buying low and selling high, but instead we often do the opposite.
This is why so many people struggle with money. It's not a lack of intelligence or education that holds them back, it's their emotions. And the most dangerous thing about fear and greed is that they can be contagious. When one person starts to panic, others often follow suit. This can create a vicious cycle that feeds on itself, causing prices to spiral out of control.
But it doesn't have to be this way. By understanding how fear and greed can influence our decisions, we can learn to control them. We can learn to recognize when our emotions are getting the better of us, and take steps to counteract them. This is easier said than done, of course. But it is possible. And the sooner we start, the better off we'll be.
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