It’s been said that fear is a stronger motivator than greed, and I tend to agree. But what implications does that have?
They both have some similarities. Fear and greed are often viewed as “negative” emotions, and both often cause people to do things that they might not otherwise do. For example, many people bought houses during the run-up in house prices a few years back.
Some people bought because they had been planning on buying anyway for various reasons, but many people bought for other reasons. Some wanted to speculate, seeing quick and easy profits in their futures. (Greed.) Others worried that they’d never be able to afford a house if they didn’t buy before prices got even more out of hand. (Fear.)
Selling happened for similar reasons. For example, I sold and re-bought in 2005 out of greed, and sold again in 2006 out of fear, frustration, and exasperation. I can tell you from personal experience that fear was much more motivating than greed.
What did I learn from my experience?
Making a profit and enjoying visions of someday creating a real estate empire? That made for nice daydream fodder, along with exaggerations of my own competence in the real estate world.
Worrying about how the heck I was going to pay my high rate, interest-only mortgage if I kept having long-distance tenant & management problems? That bad dream aiming for reality slapped me upside the face and caused me to get out in a hurry, which turned out to be a positive.
In both situations, quite a bit of luck helped me out. (I’m no real estate mogul.) But I needed to take action too, or luck wouldn’t have been enough. And it might not have ended that way. While both fear and greed can be motivating, they can also be blinding.
It’s important to take the time to realize WHY you’re considering an action, and think rationally about whether it’s like to have positive or negative results. Use fear and greed as instigators of rational thought and action, not decision makers.