Have you seen this thing called Bitcoin? It is up a gajillion percent since January and people are getting rich! They say these crypto-currencies are the money of the future.
Could Bitcoin be the Next Amazon?
Big declines create big challenges for investors. People are willing to be patient for a little while. And most understand the basic concept behind “temporary declines.” But as the losing streak continues it becomes harder to stay on track.
The chart above demonstrates a common trait we see with many investors. They notice how well something has done in the recent past. They figure it will continue doing well, so they buy. But eventually they learn prices keep going up until they don’t.
Things change and prices and values fall. Many people underestimate the emotional stress caused by prolonged declines. They sell after most of the damage is done, only to miss on the eventual recovery. Unfortunately, many get stuck in the cycle of buying at high points only to sell at lower ones.