It is a fair thing to say of a piston, an elevator or a golf ball at a certain moment that it is "going up". This suggests not only that it has been going up but that it will probably continue to go on up, for a little time at least, because whatever impulse started it is still operating to some extent. But it is not a fair thing to say of the stock market, which, not being a physical thing, is not subject to Newton’s laws of propulsion or inertia. Unfortunately, most of us unconsciously credit this false analogy. Thus we are not tempted to buy unless they are going up or to sell unless they are going down. But when the market is going up like fury, there is no reason to believe that the very next "tick" is more likely to be up than down. — Fred Schwed Jnr Because it’s easier, we are inclined to use our recent experience as the baseline for predicting the future. In many situations, this bias works just fine, but when it comes to investing it can cause problems. When we’re watching ...
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Subscribe now to unlock this article.
Support BusinessLIVE’s award-winning journalism for R129 per month (digital access only).
There’s never been a more important time to support independent journalism in SA. Our subscription packages now offer an ad-free experience for readers.
Cancel anytime.
Questions? Email helpdesk@businesslive.co.za or call 0860 52 52 00. Got a subscription voucher? Redeem it now.