When prices rise, investors often get excited. Their stocks, ETFs, or portfolios are worth more, which feels good. This tends to make investors want to buy more, hoping for even bigger gains.

The mood gets even better as prices keep climbing. But the higher the peak, the riskier the situation: stocks are at their most expensive right at their high point. Anyone buying in at this stage faces the greatest risk of loss if prices fall again.

When prices start falling, the mood flips. The longer the decline lasts, the more fearful investors become. But fear is a poor advisor. Even though it's hard to stay calm and stick to your long-term plan during a downturn, history shows that doing exactly that is often the wisest move, because prices have always recovered eventually.

When prices just keep falling, investors slowly grow desperate. Panic sets in, and this can push investors to want out of their investments entirely, even at a loss. But since you only realise a loss when you sell, you can also choose to hold on, expecting better times to return.

When prices hit rock bottom, investors feel utterly downcast, as if things will never improve. New investors are afraid to get in, assuming there's nothing to gain. But after rain comes sunshine (eventually), and rock bottom is also a moment when you can buy in at favourable prices.

As prices start climbing again, investors regain their appetite. Hope for good returns returns, buying picks back up... and the emotional rollercoaster starts over.