Understanding the Fear and Greed Index

What Is the Fear and Greed Index?

The Fear and Greed Index is a tool that tries to capture the overall sentiment of investors in the U.S. stock market. Created by CNN Business, it analyzes a mix of 7 indicators to determine if the market is driven more by fear or greed at any given time.

How Does It Work?

The index ranges from 0 to 100:

0–25 = Extreme fear
25–50 = Fear
50–75 = Greed
75–100 = Extreme greed

It combines indicators like:

Stock price momentum
Market volatility (e.g., VIX)
Put/Call ratios
Junk bond demand
Safe haven demand

Why Investors Use It

When the index shows extreme fear, some investors see a buying opportunity.
When it shows extreme greed, others may get cautious.

It’s not about timing the market perfectly — it's about understanding the mood behind price movements.

Limitations to Keep in Mind

This index is based on short-term data. It reflects current mood, not long-term fundamentals. Market sentiment can shift fast — and extremes can last longer than expected.

Bottom Line

The Fear and Greed Index won’t tell you what to do, but it gives insight into what the crowd is feeling. Knowing the mood can help you stay level-headed — especially when others are panicking or getting carried away.

Dollar Cost Averaging: A Steady Approach to Investing

Want to invest without stressing over market highs and lows? Dollar Cost Averaging (DCA) is a simple, consistent strategy that helps you build your portfolio over time—no market timing required. Learn how it works, why it appeals to everyday investors, and how it can help reduce emotional decision-making.