Unfortunately the anger is usually directed at brokers, analysts, company management, and friends. Thus one is likely to angrily sell a stock because we felt that management let us down by not revealing some glitch in the company s progress. In the market, getting even means immediately making up for the loss. In this vengeful state, the choice of the next investment will almost always lack the careful consideration of the first. Investing in the context of Loss Loss may seem like a strange emotion to consider in the context of financial decision making, but volatility in the market tends to evoke and then telescope past losses into the current situation.
All human beings experience both real loss of valued people and emotional losses.
If one has not resolved former real or emotional losses, there is a tendency to blindly eliminate losing situations in the face of downside volatility. This is one reason many analysts down grade stocks after they have already tanked and why investors often sell at the bottom. They experience an almost panic like psychological urge to divest themselves of the psychological and paper position of loss without first understanding whether the fundamentals warrant such actions. Such mistakes frequently occur on anniversaries of former losses. Common to those who have not resolved emotional or real losses is a panic like feeling when a fundamentally sound stock begins a sharp retreat.