Individual investors often buy high, at the tail end of a market bubble, and sell low, just before a bull market is about to start again, Kiley said.

"From an emotional perspective, for individual investors it is a lot easier to buy high and sell low, but the exact opposite is required," Kiley said.

. . .

Individual investors could make the biggest stock market gains by simply picking good stocks and waiting for growth, Bernstein said. But many, he said, have been trained by the speculative investing environment of the 1990s and are not looking in the right areas.

"Individual investors can wait for the market to come in their direction, but nobody wants to do that. They say they want to follow what's hot," Bernstein said. "To me individual investors are wasting immense opportunities to build wealth here."

We were actually talking about this very fact at work recently. People are much more likely to feel good about getting nailed if lots of big banks take a hit, rather than taking a chance and sometimes being wrong when the big banks are right. It's most profitable to hold a diverse portfolio and sit, but people would rather emulate what they see on TV, despite the fact that corporate strategies are not really appropriate for individuals.

Psych, I guess.