P

P

Lord Jesus Christ Says...

The thief cometh not, but for to steal, and to kill, and to destroy: I am come that they might have life, and that they might have it more abundantly. I am the good shepherd: the good shepherd giveth his life for the sheep.

4 Nov 2017

SHARE MARKET- RATIONAL & IRRATIONAL.

Hi Friends,  Stock Markets are basically irrational.  They are driven by almost everything except reason and logic, or rather, reason and logic are overshadowed by hopes, fears, greed, ambition, fads, hot tips, rumours, superstition, ignorance, fanciful projections, news headlines and numerous other irrational causes which are impossible to identify and list.  It is difficult to see how a rational investment policy can possibly succeed in such an irrational environment.  But surprisingly , it does.  In the long run rationality does pay.   The investor who can keep his head, while everyone around him is losing his, does succeed in the stock market.


The two strongest emotions operating in the stock market are greed and fear.  Greed is the dominant emotion in a booming market.  It makes individuals grasp and grab when they buy shares.  There is often a mad scramble to get on to  the stock market bandwagon during a boom. Share prices skyrocket to levels which lose all touch with reality.  On the other hand, fear takes over in a falling market.  Share prices nosedive and panic selling starts as investors and speculators scramble to get out before the prices fall further.  It is greed and fear that lead to excesses of over valuation and under valuation of shares in the stock market.  The rational investor takes advantage of these market over-reactions to make profits.  He buys when the shares are under priced and sells when they are overpriced.  The more irrational the market, the greater the opportunities for the rational investor to make big profits.  An irrational market provides rich money-making opportunities for the cool, objective, rational investor.  In short, an irrational market is a rational investor’s dream come true.

Good Luck.                                                        See You Later.

No comments:

Post a Comment