Ask even the most novice investor and I bet they can recite the words “buy low and sell high” to you. It’s an incredibly simple concept, yet most people can’t follow through with it. Human behavior plays an important role in determining actual investment returns. All of those numbers you see about gains, losses, and what the Dow is doing? They are important, but not as important as the decisions you make.

This morning I was catching up in my feed reader and I stumbled across a post over at Behavior Gap titled When Things Clear Up. If you haven’t been over to The Behavior Gap before, I suggest you check it out. Carl does an amazing job in pointing out the deficiencies in human behavior that lead the average investor to realize even worse returns than what their actual investments they hold return.

In Carl’s post about when things clear up I see a striking resemblance to the discussions I’ve been having more frequently in recent weeks. He points to an NPR story where a couple confesses to getting out of the market back in March, but are now ready to get back in because they think things have cleared up. Read the rest of this entry »