They say that the market can keep irrational longer than you may keep solvent. That quip is broadly attributed to well-known economist John Maynard Keynes, who was almost worn out within the 1920s with leveraged overseas forex trades that went the unsuitable approach.
An amazing many buyers have realized this lesson the arduous approach, ruined not essentially as a result of they have been unsuitable and the market was proper, however as a result of they ran out of money earlier than the market corrected its mistake.
This usually occurs inside asset bubbles. Costs could also be overinflated, but they proceed to rise. These positive aspects lure extra consumers, who propel costs even greater, which ends up in much more rampant hypothesis. Very similar to a pyramid scheme, profitable investing in such circumstances solely requires one idiot to seek out a good larger idiot keen to pay a better worth.
That is the character of momentum investing — it really works till it stops working. After which it will get ugly. However going in opposition to the herd with brief gross sales carries its personal dangers. As Mr. Keynes came upon, you may run out of cash lengthy earlier than the bubble lastly pops.
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