- Everyone (including investors) has different goals and time horizons
- Prices that look ridiculous to one person can make sense to another, because the priorities for both of them are different.
- Nobody can tell you what to do with your money unless they know your goals, your priorities, your emotional endurance, etc.
It is hard to grasp that other investors have different goals than we do, because an anchor of psychology is not realizing that rational people can see the world through a different lens than your own
Explaining with an example
- If an asset is consistently moving up for a period of time (has momentum), its not crazy for a short term trader to assume it will keep moving up.
- They don’t need it to be moving up indefinitely, just for the short time that they will be invested (typically a day to few weeks)
- Even if an asset is over-valued, that is not a concern for a short-term trader since they just need it to move up slightly.
- However, a long-term investor would find it ridiculous to invest in such an asset