Thursday, April 3, 2008

New Video: Following the Crowd and the Role of Expectations

Blindly following the crowd can lead to some of the worst investment decisions - something everyone is expecting in the future is also often already reflected today.

Smart investors spend a lot of time trying to figure out things that might not be expected or priced in - that is also a reason why financial literacy and therefore not having to believe everything one hears is so important.

Often one can read headlines like 'this market is expected to rise strongly for the coming year' or 'this stock will perform strongly'. If everyone, or a very large percentage of the market participants, expect the same thing, then often that future expectation is already priced in today.

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