Did you see this market crash coming, because I didn’t?

We should be buying now when the shares are cheap

Will we ever learn from our mistakes? Probably not. The stock exchanges went from a high-point in June 2007 to a low in March 2009, dropping about 50 percent in under 20 months.

2006 and 2007 Celebrations

We should have seen it coming, but most of us didn’t. In fact, most investors were too busy rejoicing, celebrating their Market wins in 2006 and 2007 to look around and see if they were about to careen off the cliff. We were taking and repaying Cash Advance Loans at a high rate of knots. All was well with the world.

It's called overconfidence - the belief that you’re more skilled than you really are. That's the reason we get ourselves into investment hot water. Overconfidence makes you unwilling to recognize bad news.

Overconfidence comes from early success

It happens to all of us who play on the market at some time. We buy some stocks. They go up. We sell and we've made money, all at the cost of a couple of phone calls and some broker's fees. You then attribute all this to your own skill instead of the dumb luck it’s likely to be.

This spectacular operation of yours, on which you get good mileage at dinner, at lunch and in the locker room at the golf club, turns you into an instant stock genius.

The Accidental Investor

That tendency toward overconfidence gets magnified when it’s combined with our tendency to use past situations to evaluate risks in the here and now. Experiments have shown that when people risk their own money on an investment and succeed, they’re likely to take on even more risk the next time around. Why? They don’t think of that money as theirs. It feels like they’re playing with house money. ... click here to read the rest of the article titled "Did you see this market crash coming, because I didn't?"