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Buy and Hedge: The 5 Iron Rules for Investing Over the Long Term by Wayne Ferbert, Jay Pestrichelli

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7. Emotion Is the Enemy

“Fear is the path to the dark side. Fear leads to anger. Anger leads to hate. Hate leads to suffering. I sense much fear in you.”

Yoda from Star Wars–Episode I: The Phantom Menace (1999)

This is the second chapter in this book that describes emotion as being the enemy. This is neither a misprint nor a coincidence. Too often, investors get caught up in the emotions surrounding investment gains and losses. The two most powerful forces that drive the markets are greed and fear. These “forces” are actually feelings—meaning that they are powered, in part, by emotion. Upward-moving markets tend to create updrafts that fan the flames of greed. Correspondingly, downdrafts tend to fan the flames of fear. In either case, these ...

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