Is it risky to invest when public sentiment is negative?
To the contrary, that’s the best time of all! The public, in general, tends to react to what has already happened and assumes that the past will continue. Investors have no way of seeing the end of a trend until it’s well behind them. But we know that all trends end when the last holdout joins the crowd …when the last buyer buys or the last seller sells. The trend ends when sentiment reaches an extreme level. Then, because all the fuel for that trend is exhausted, the trend reverses. In general, the better you are at gauging the mood of the crowd, the more confident you will feel about buying when all about you have sold in panic …and moving to the sidelines when all about you are buying feverishly.
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