Wednesday 14 April 2010

A Powerful Foundation for making intelligent decisions in the stock market: Knowledge of fundamentals of the company and human behaviour (psychology)

In recent years, behavioural finance has shed light on the psychology of stock prices and financial decisions by market participants.

Eventually, two main forces affect stock prices in the market:

  • the fundamentals of the company, and,
  • human behaviour.


Both forces have a role to play.

However, a combined knowledge of the two should make a more powerful foundation for making intelligent decisions in the stock market than relying on fundamentals alone.  

Many investors make dumb decisions by chasing stock prices.  Do you?  If so, what can you do about it?

We will get better answers by studying psychology than by boning up on finance alone.


The dumbest reason in the world to buy a stock is because it's going up.
- Warren Buffett

Related:

****Be a Better Investor

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