Greed Versus Fear

When the market is going up investors and traders that actively participate in it are said to be motivated by greed. When those same investors refuse to participate when the market is going down, by either cashing out or not adding to current positions, those same traders and investors are said to be motivated by fear. Contrarians are told to buy when everyone else is fearful and sell when everyone else is greedy.

Is all of this investing behavior correct, incorrect, or a mixture of both? If it's a mixture then which part is correct and which is incorrect? Everyone must admit that greed has paid off, but so has fear, and contrarianism. So buy and hold is the strategy that is recommended to take advantage of all of the ups and all of the downs in the market.

Buy And Hold

Since the stock market averages up over time the wisdom is stay in it for the long-haul and don't worry about its price fluctuations.

Experts say "if an investor were to have held an S&P 500 index fund between Jan. 1, 1995 and Dec. 31, 2014, they'd have netted a cumulative return of 555%, or 9.9% a year. This includes holding through both the dot-com bubble and the Great Recession. But, had they missed just the 10-best trading days over this 20-year period because they'd scurried to the sidelines out of fear, their aggregate return would have been more than halved to 191%."

But isn't the reverse also true? What if an active trading investor hadn't been in the market for just the 10-worst trading days over a 20-year period where would their portfolio have been? Wouldn't the aggregate return be far-higher than the average return over that period?

Timing The Market

All experts agree that this can't be done. While it is true that it can't be done with 100% accuracy is it possible for an informed trader to be right more often then he or she is wrong? Thus maximizing participation in the market on it's best days and minimizing the damage done on it's worst days? Sure, sure that's a better way but only professional trading gurus and large analytical staffs could ever hope to succeed at this strategy, right?

Research To The Rescue?

The internet has opened up information to retail investors that used to only be available to experts. Gurus used to process this financial information and come up with indicators that could give them an advantage in knowing when to limit or maximize trading in particular stocks. But now with the internet, and the research available at various trading services, even retail investors (non-experts) can improve their ability to trade in and out of stocks manifesting trading signals for price increases and decreases. Technical indicators combined with the financial news now available for stocks that trade on the US stock exchanges can warn retail traders as to which stocks to avoid and give a heads up regarding stocks to buy because they are poised to move up in price.

Now it comes down to choosing which stock research site to use. There are a prolific amount of research sites to choose from and success at the use of any will be dependent on the skill of the individual trader to execute on the information given. With care and attention to detail the right stock research site combined with timely news about stocks on a watch list can result in an above average success rate on choosing and timing the buying and selling of winning stocks.

Resources for financial news on stocks:
Yahoo Finance
CNBC
Bloomberg
MSN Money
Zacks

Resources for easy trading research and signals:
Most Excellent Investor - our site