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Human behavior has a tremendous impact on investing — more so than most realize — and one of our biggest weaknesses is the tendency to constantly compare and contrast ourselves to others.

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For example, a 1995 study by the Harvard School of Public Health indicated that people will forgo a stronger income scenario in favour of a weaker one as long as it meant earning more than their neighbours.

Unfortunately, many in the investment world are keenly aware of this and will structure their marketing efforts accordingly. As a result, you have a compounding of momentum or trends in the market as investors buy at or near market tops for fear of not doing as well as or better than others.

For the same reason, investors piled into technology stocks in 2000 with only the promise of earnings in some distant future, and into housing-related investments in 2007 that were backstopped by very low incomes.