"General question: What makes us all "fall in love" with a stock so much that we ride it way down and hold forever, but get scared out of our winners on upswings?"
daniel, i'll take on the first part of your question...regarding holding forever. aside from the obvious premise that says you haven't lost money until you sell the stock, i think there may be a connection to the fact that americans love an underdog. we hope for the best from underachievers. the reality is, of course, quite the opposite. in sales, the two biggest management myths are that 1) low producers can get better, and 2) top producers cannot get better. i believe that this carries over into the stock market.
as for the second part of your question, why do we get scared out of winners, i believe it can be attributed to a prevalence of negative thinking. sad to say, but most folks either expect the worse, or are conditioned to be constantly aware of the worst. it appears to be always right around the corner. how many times have you heard a friend who, upon hearing good news asks suspiciously, "what's the catch?"?
hey, i'm rambling. good question you asked.
in love AND scared,
mr.mark |
