“History does not repeat itself exactly, but behavior does,” according to legendary Wall Street veteran Bob Farrell
The economy is going through a recession, as it does periodically — but this recession is different from the last few our nation has experienced. Some economists have likened it to The Great Depression — not so much in terms of magnitude, but rather its structural characteristics.
It’s nothing short of dangerous to use the excuse that “this time is different,” to justify an investment stance that makes a dramatic break from established historical perspectives (e.g., buying tech stocks in late 1999).
Does history repeat itself?
But it’s often quite true: usually something is different every time we see an unusual market event.
And it’s that ability to discern a truly unique market phenomenon from an excuse for bad decision-making that separates good investors from great investors.
While we can’t count on history repeating itself exactly, as Farrell says, we can at least count on investor behavior remaining the same. We’re only human, after all.
This is why we see investors make the same emotion-based mistakes during this bear market as they did in bear markets previous.
How do I take the emotion out of my investment choices?
Resilient investors overcome the tendency to plan investments emotionally, rather than logically.
The key is to be aware that your emotions will, at times, block your ability to make reasoned, rational decisions. With this new awareness, you can slow down your decision-making processes until you separate the “good” investing information from the “bad.”
With a little extra time and thought – and less “emotion” — you will create a solid investment portfolio that stands the test of time.
photo credit: milena mihaylova
If you enjoyed this post, please consider leaving a comment or subscribing to the feed to have future articles delivered to your feed reader.
Related posts:
- The Resilient Investor: Financial Meltdown Anniversary This week marks the two-year anniversary of the financial...
- Best Mutual Fund of the Decade: CGM Focus The financial media is pleased to report that the...
- The Resilient Investor: Mental Accounting Sunk costs and mental accounting can be hazardous to...
- The Resilient Investor: Is Investing About the Short Term or the Long Term? In investing, it’s natural to seek out clues that...
sign up for our 
subscribe to the