Stock School Video 6: Be the contrary investor

Lars Tvede gives you tips in the Euroinvestor Stock School to improve your investor skills. Part six is about going against the consensus, and not invest like the crowd. Lars Tvede explains what to pay attention to.

"We are too easily being fooled by the general mood"

  • We tend to use the latest prices and market trends as our main measure of the underlying value, and we use the market trend as an implicit forecast of future.
  • We buy, when the neighbors and everyone else have bought and sell when the market has already collapsed.
  • We underestimate the market's tendency to turn direction. We say to ourselves "This time it's different," when we see a mature bull or bear market.
  • We increase our risk appetite after having earned good profit in a bull market. In contrast we tend to be too cautious after having lost money in a bear market.
  • We decide the strategy in groups, where there is a high degree of consensus and enthusiasm.
  • We listen mostly to people we like and who agree with us.
  • We rarely define in advance (when markets are calm), the levels at which we would like to buy or sell various assets. And even if we do so, we later change our plan for trading when the market moves.

 

Learn more about investing
You can buy book The Psychology of Finance, by Lars Tvede here

Or see the latest book by Lars Tvede: Super Trends - Winning Investment Strategies for the Coming Decades

 

Click to see more videos from  Euroinvestor Stock School

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