Most Americans would rather drink a cup of Java than invest in the Stock Market. Interestingly, many of these individuals are stunned that the market contiues to surge higher and higher when real jobs are not as easy to find, rent and cost of everyday necessities keep rising. 61% of Americans drink coffee on a daily basis compared to 48% that invest in the markets. These remarkable facts were published in a recent article; the article states that if the $1200 that the average American spends on coffee were invested in the market in 2009, it would have grown to $3600.
So what gives?
Well, we could give you the long answer, but the short answer is probably the best route to take in following the KISS principle. Mass psychology states that when the masses are fearful or cautious that opportunity is usually in the air, and that is what is taking place now.
The masses are uncertain; they feel that the markets should crash as the economy is far from healthy. What they fail to understand is that markets climb a wall of worry and fall a cliff of joy, and that is exactly what is taking place now.
The average Joe complains and whines about how high the market has gone and how it is too late to get into. Their next argument is that the stock market is destined to collapse as the entire economic landscape looks miserable right now. If the markets operated on that type of logic, then all these average Joe’s would be millionaires, but turns out they are not and that is why they are called “average”, for they fail to think out of the box.
The masses are always on the wrong side of the market. To win you need to break free from the mass mindset. This means that you do not base your investment decisions on your gut instinct. Instead, you pay attention to what the masses are doing.
The masses are nervous now, and that means the markets will continue to trend higher. When the masses join the bullish club and turn euphoric, then it will be time to bail out. For now, it’s not the time to sell and the fact that more Americans enjoy a cup of Java indicates clearly that the markets are destined to soar higher.
Don’t follow the masses as they sit and whine about what they would have done and if they could go back in time. The truth is that they given the same opportunities they would react in the same manner. They let fear do the talking and sell when they should be buying and buy when they should be selling stocks. If you want to win in the markets, you have to control your emotions or be controlled by them. It is impossible for an emotional trader to win in the markets.
Our favourite saying at the Tactical Investor is, take control of your emotions or be controlled by them.
Originally published at the Tactical Investor
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