Title: Financial Markets: When Fear and Greed Take Over
Headings: Financial Markets: When Fear and Greed Take Over
Financial Markets: When Fear and Greed Take Over
Key Takeaways
The Influence of Greed
A Lesson From the "Oracle of Omaha"
The Influence of Fear
Following the Herd vs. Investing Based on Fundamentals
The Importance of Comfort Level
Frequently Asked Questions
Why are fear and greed so important to market psychology?
How do fear and greed affect markets?
How can traders take advantage of fear and greed in the market?
How can one measure the level of fear or greed in the stock market?
The Bottom Line

Content: It's usually best to ignore the trend at the moment—whether bullish or bearish—and stick to a long-term plan based on sound fundamentals. It's also critical to understand how risk-sensitive you are and to set your asset allocations accordingly when fear and greed grip the market. The Influence of Greed
Most people want to get rich as quickly as possible, and bull markets invite us to try it. The Internet boom of the late 1990s is a perfect example. At the time, it seemed all an adviser had to do was pitch any investment with " dotcom " at the end of it, and investors leaped at the opportunity. Accumulation of internet-related stocks, many of them barely startups, reached a fever pitch. Investors got exceedingly greedy, fueling ever more buying and bidding prices up to excessive levels. Like many other asset bubbles in history, it eventually burst, depressing stock prices from 2000 to 2002. 1
As fictional investor Gordon Gekko famously said in the movie Wall Street, "greed is good." However, this get-rich-quick thinking makes it hard to maintain a disciplined, long-term investment plan, especially amid what Federal Reserve Chair Alan Greenspan famously called " irrational exuberance. "