Typically, unsophisticated investors tend to buy near tops and sell near bottoms… exactly the opposite of what they should be doing. And there is a very good psychological reason for this. They start out cautious and then as others begin making more and more money in the market the Fear of Missing Out (FOMO) takes over and eventually they get in to the market. They may make a little money and decide they are geniuses and commit more and more money. Eventually, everyone with available money has invested and there is no one left to buy so the market crashes. The unsophisticated investor holds on initially knowing the market will rebound as it “always” has. Then he holds on because he has “lost too much to get out now” and finally when he can’t stand it any longer he sells vowing never to invest again. This turns out to be the bottom, as there are no more people left to sell, and the market turns up. But “once burned, twice shy” so the unsophisticated investor once again refuses to buy until the market nears another top and “everyone is making money in the market”.
Historically Investors Become “Long-term Buyers” at Precisely the Wrong Time
Rise of the “Know Nothings”
With the longest “Bull market” in history in full swing young investors are flocking to the market with no experience of ever having seen a full-fledged crash only “corrections” that are quickly reversed into higher and higher valuations. Twenty-somethings were still in elementary school in 2008 so it is a distant memory… let alone 2002-3 or 1989. With no experience in dealing with a crash, they are plunging into the market at record levels.
Investors vs. Traders and Precious Metals
The precious metals market is but a fraction of the size of the either the stock or bond market and so if even a small portion of either of these markets were to move into precious metals i.e. Gold, Silver or Platinum it could move that market drastically. Many investment advisers recommend having 5-10% of your investment portfolio […]
