Investor Psychology
Article by Lynn Phillips-Gaines
(Published on July 4, 2021, in Starkville Daily News)
When I hear that one of the most conservative CPAs in the Golden Triangle is making stock recommendations to his buddies, I know the market is flying high. When skittish investors are stock experts, it is one of the telltale signs of a possible market peak.
What is old is new again. The issues which we had to plan around for clients in the 1980s are circling back. The three challenges impacting financial independence are increased taxation, increased inflation, and the reluctance to get serious about a bonified investment plan.
It is hard to take these issues seriously unless you have lived through these times. According to Morgan Housel in The Psychology of Money, your investment behavior develops through your experiences during adolescence or early adulthood.
Interestingly, people from different generations, born into other economies, different families in different geographical regions, learn very different lessons about investing. And, behavior psychology tells us that what you experience is more compelling than what you learn second-hand. Your personal experiences with money are tiny relative to what happens in the world of finance; however, part of what happens in the world will constitute 80% of how you think the world works. Thus, “experts” differ widely in explaining what is happening in the world of finance.
See below for the full article that was published in the Starkville Daily News.
