![]() ![]() Many times during my career as an investment adviser I found myself talking clients off the edge, especially in bear markets or sharp pullbacks. The difference between successful investors and those who are not depends on how we handle these emotional responses. This loss aversion principle affects us all. Those same experts argue that the pain of losing is psychologically about twice as powerful as the pleasure of gaining. Scientists believe that it all stems back to prehistoric times when a struggle for survival evoked a fight-or-flight impulse that exists to this day. The fact is that most people are hard-wired to react emotionally to the ups and downs in the stock market. Only 20 percent of these corrections have resulted in a bear market since 1974. Since the year 2000, downturns of 10 percent or more occurred in more than half of those years. ![]() Every two or three years the markets experience a 10 to 20 percent correction. Stocks can repeat this behavior several times a year before regaining losses and moving higher. On average, pullbacks like the one I am expecting last a month or more and then require another month to regain the previous price level. ![]()
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