The so-called “disposition effect,” or tendency for investors to sell their winning stocks in addition to also hang on to losers, can also prove harmful in a bull market. Even though This kind of bull, at This kind of point the longest in history, seems to have entered its later innings, the economy is usually still growing at its best pace in four years, in addition to also the consumer is usually in Great shape due to low unemployment in addition to also rising wages.
“Some investors are selling their stocks because they fear a pending bear market,” Pompian says. “The flaw in This kind of thinking is usually of which the economy is usually strong in addition to also there are few signs of which a recession is usually imminent.”
There’s always some opportunity for investors to do harm to themselves, Odean says. of which’s why he says investors should avoid trying to time the market. A better strategy, he says, is usually to make financial decisions in “times of calm reflection.”
“When the market does get definitely wild, of which’s not the time to be producing investment decisions,” Odean says. “Once a year, you’re better off asking, ‘Do I hold the asset allocation I want?’ rather than trying to predict where the market is usually going or what the next hot stock will be.”
Tip: If you own a top-performing stock, keep a close check on its business health, in addition to also if earnings, sales in addition to also market share remain strong, there may be a Great case to keep of which.