What are greed and fear?
Greed is the pull of more profit, fast. When prices keep rising it feels like “if I don’t buy now I’ll be left behind”, and risk slips out of mind. Fear is the panic of losing. When prices keep falling it feels like “it will fall further, let me get out with what’s left”, even if the reason you bought is still the same.
Both are normal human feelings and they will always be there. The trouble starts when they make the decision and we just press the button. Because many people feel the same emotion at the same time, market prices too often rise and fall more on emotion than on reason.
Say Nasrin had been saving quietly for some years. The share market has a great year and everyone at the office talks about their profits. She puts a large part of her savings into the market, close to the top. The next year the market starts to fall; she checks her portfolio every day and cannot sleep, and one day she sells everything in fear, close to the bottom. Both decisions were made by emotion. The story is made up.
Why it matters to an investor
- Buying high, selling low: greed pulls you in near the top, fear pushes you out near the bottom.
- Lower actual returns: because of badly timed buying and selling, investors often earn less than the investment itself earned.
- Taking risks you don’t understand: in greedy times, many borrow or hand money to unfamiliar schemes as soon as they hear “high returns”.
- Losing sight of goals: getting out during a temporary fall can wreck a long-term plan.
The emotional cycle
In every big market swing, roughly the same stages of emotion appear. It is not a precise formula, but it helps you recognise yourself.
- Hope and interest: prices start rising, “this is going well”.
- Excitement and greed: everyone talks about profits, “this time can’t go wrong”, nobody wants to hear about risk.
- Unease and denial: prices begin to fall, “it’s temporary, it will bounce back”.
- Fear and panic: the fall deepens, “it’s all over”, and many get out at any price.
In numbers: the cost of emotion
The research firm Morningstar measures each year how much funds themselves returned, and how much investors actually got, given when they bought and sold. In its figures published in August 2026, over the ten years to December 2025, US funds and ETFs returned about 9.9% a year on average, but investors’ money earned about 8.7% a year. That is about 1.2 percentage points a year lost purely to timing.
By the same measure, the gap was larger for funds whose prices swing more, over 2 percentage points a year for the most volatile. The reason is simple: the more prices swing, the more greed and fear are stirred. These figures are from the US, not Bangladesh, but human emotions work much the same everywhere.
A famous line, and what it really means
In his 1986 letter to shareholders, Warren Buffett wrote that they try “to be fearful when others are greedy and to be greedy only when others are fearful”. This is not a signal to buy or sell. Its core point is that your own reasoning matters most exactly when the crowd’s emotion is at its peak. And that is easy to say and hard to do.
- A plan written in advance (how much goes where, and why) acts as an anchor in emotional moments.
- Investing small amounts regularly takes pressure off the question “is now the right time?”.
- Waiting a day or two before a big decision gives emotions time to cool.
Worked example
- Say a fund’s unit price over three years goes: Tk 10 → Tk 13 → Tk 10.4 → Tk 13.
- The patient investor buys 10,000 units for Tk 1,00,000 at the start and holds. At the end: Tk 1,30,000.
- The emotional investor buys 5,000 units for Tk 50,000 at the start. Seeing the first year’s gain, greed makes them buy about 3,846 more units for another Tk 50,000 at Tk 13.
- When the price falls to Tk 10.4 in year two, fear makes them sell all of about 8,846 units: they get about Tk 92,000. They miss the third year’s rise.
Result: the same fund, the same Tk 1,00,000. The fund rose 30% over three years, but the emotional investor lost about 8%. The difference came from behaviour, not the fund. The numbers are only an example.
See the numbers as a table
| Total return | |
|---|---|
| Patient investor | 30% |
| Emotional investor | -8% |
Common mistakes
- Pouring in a large sum at once after prices have already risen a lot, thinking “it’s not too late”.
- Checking your portfolio every day, even every hour, during a fall and feeding the panic.
- Borrowing to invest in greedy times, which makes the fear far worse when prices fall.
- Treating Buffett’s line as a buy-sell “formula” and betting against the market without understanding.
Greed and fear will always be there; the aim is to stop them making the decision. A plan made in advance is your best support in emotional moments.