Chasing the Market

Chasing the Market

Entering or exiting of a trend after the trend has already been well established. Investors are often unaware of the fact that they are chasing the market which can dent the value of a portfolio. This type of investing is often seen as irrational as decisions are often based on emotion instead of careful analysis of the value of the investment.

Notes:

Chasing the market refers to both the entering into highly priced positions after they have rapidly increased and become overvalued as well as the exiting of positions after they have rapidly decreased and become undervalued. During the internet bubble some investors entered the rapidly appreciating sector well after the trend had been established and lost considerable sums when the bubble bust.

See also: Bubble, Financial Porn, Fire Sale, Irrational Exuberance, Overvalued, Trend, Undervalued

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Chasing the market

Purchasing a security at a higher price than expected because prices are rapidly climbing, or selling a security at a lower level when prices are quickly falling.