Keeping one’s cool riding investment‘s reflexive roller coaster

Most studies of historical risk and return tell us to sell when prices rise and buy when they fall. “Bull markets are born on pessimism, grown on skepticism, mature on optimism and die on euphoria,” goes the old adage. Sell greed and buy fear, as they say. Yet, we often end up doing the opposite. Sometimes that works for a short period, but it often ends in tears. The only way to avoid this emotional roller coaster is to stick to a disciplined investment plan. “To invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights or inside information,” said veteran investor Warren Buffett. “What is needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework.” The figure which follows traces our emotional range on the investment roller coaster. Financial risk peaks when we are euphoric and