Marquette Talks: Market Psychology

In this article, I want to talk about something that is often overlooked but is very important to have in mind. Psychology has taught us many things about our behavior as consumers. Given that the study mainly revolves around behavior patterns, I believe there is an excellent upside to taking a step back and analyzing oneself and the competition.

In economics, this last factor is critical. Many times, people misunderstand the broad scope of the economic and political field and fail to regard it as a science. There are processes and methodologies in all sciences, but an essential part is a perspective. If people chose to ignore their consumer behavior patterns, and on top of it, try to rush through the process, that’s when there are issues and projects don’t go as planned. Furthermore, this pattern of thinking in the long term is not feasible.

In investments, one of the hardest things to do is applied portfolio management. You identify the constraints on a strategy and optimize for the highest return level while minimizing risk. Unfortunately, the market is often seen as a competition when it should be looked at like a partnership. I believe this partnership shouldn’t be limited to the block you have with the company you invest in, but also all the other shareholders. Emotions should be set aside when engaging in the market, and we should look at the great investing minds of this generation and follow their lead. At the end of the day, everyone wants to be with the best, so why not invest like the best? Understanding their strategies and seeing that copying their approach will make you their indirect partner and could learn a lesson or two along the way.

Learning and understanding how the markets work and concluding that they are not efficient are imperative so you can avoid speculating and timing the market. Understanding that in the market, time works for you is crucial. Furthermore, learning that timing the market is impossible when you are competing against the biggest and best financial institutions in the world is essential. Why? Because the information that the average retail investor has, compared to any hedge fund, is tiny.

To conclude, there are many great opportunities in the market; it’s just a matter of having good market psychology and having a solid strategy. To finish the article, I would like to reference and add to a very famous Wayne Gretzky quote; “you miss 100% of the shots you don’t take,” so make sure you are shooting from your sweet spot.

#MarketPsychology #GoalSetting #WealthManagement