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Investor Psychology 101


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Fortunately, one of the most valuable lessons of my career came in the early 1970s, when

I learned about the three stages of a bull market:


• the first, when a few forward-looking people begin to believe things will get better,

• the second, when most investors realize improvement is actually underway, and

• the third, when everyone’s sure things will get better forever.




To aid in your consideration of the future, I’ve formulated the converse of the above, the

three stages of a bear market:

• the first, when just a few prudent investors recognize that, despite the prevailing

bullishness, things won’t always be rosy,

• the second, when most investors recognize things are deteriorating, and

• the third, when everyone’s convinced things can only get worse.


Howard Marks, The Tide Goes Out (March 18, 2008)

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