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Don’t Make Me Say I Told You So 145

Acting on Fear

The problem is not really the flow of information; it’s the
understandable pull on investors to do something based on

what they’ve heard that hour, that day, that week. You get the
feeling that the world is falling apart, and you’re sitting there,

waiting for the sky to fall in on you. You might feel that everybody
and their brother are making boatloads of money (think of the

dot com stock boom) and you’re asleep at the wheel. You feel
that you should be doing something, you’re just not sure what.

More evidence of investors making poor investment
decisions based on emotions comes from a Franklin Templeton

Investments survey of 1,000 people in early 2010. We’ll look at
this time frame because it was just after the most recent major

market crash.

After dropping 34% in 2008, the Dow rebounded sharply in 2009.

2008 Dow Jones 2009 Dow Jones
Industrial Average Industrial Average
-34% +23%

Chapter 4: The Most Common Investor Mistakes