History Does Not Repeat Itself, But It Often Rhymes

Would you allow a doctor to open you up and perform surgery if he had not utilized the critical necessary tools? Of course not. That would be just plain irresponsible. Then why would you do it when investing?

Emotions.

They are an essential ingredient not only in life, but also in investing. When it comes to putting your hard-earned income to work, they are something like your biggest enemy. There is data going back to the first recorded economic bubble in 1636 - the Tulip mania - and the first ever stock market bubble - the South Sea Bubble - in 1720, where sentiment went haywire.

In the latter, even one of the greatest geniuses of all times, Isaac Newton, became a victim of his own feelings.

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Chart 1: Isaac Newton and the South Sea Stock Bubble, December 1718 - 1721