Irrational behaviour: being happy when stock prices rise

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As observed on HardwareZone SSI. Why are people so happy when stocks are getting more expensive? In a bear market, you're going to earn more money! As you reinvest more dividends or other income, you compound your capital at a cheaper rate. Of course it's a different story if you urgently need to liquidate. Then you shouldn't be buying stocks?!

In a bear market, usually pessimism will cause stock prices to depress more than their fundamentals deserve. I mean, a couple of quarters of 20% reduction in earnings simply shouldn't deserve a >20% reduction in price! After all, you're paying for the cash flows of the company in the long term.

So stay invested and don't market time, because eventually reversion to the mean will occur, and you don't know when it will occur.


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