Richard Thaler is a known investor and great investor who has published his books on behavioural science which is directly linked with investment and economics. Richard Thaler manages billion dollars of hedge and a mutual fund for big companies. He has also done a cameo in 2016 the Big Short which depicts the story of how the 2007 financial crisis happened. In a recent interview, Richard shared some great investment tips which can be used by general investors also.
He said that the only demerit which most of the investors have common is overconfidence. He said many people are blinded by their ego and don’t go with the market. If professional investors who have access to all investors are not taking decisions wisely, then how can an individual investor do such a thing. Richard also mentioned about not leveraging maximum benefits by investing their 401Ks. Some employees are not utilizing funds not and adequately investing a good portion of their hard-earned money.
While explaining the behavioural science of investors getting confident, Richard said many people get used to big companies stocks which give most of the times a passive income. However, one can not generalise the stock market based on only a few companies shares performance. Richard smartly answered the question of how a typical investor should avoid being overconfident about investing. He thinks one should not invest in such companies which he doesn’t know about because he has invested hedge fund or mutual funds monies into those companies which are appropriately analyzed and studied. According to him, individual investors change their decision after looking at prominent officers, making a promise of changes or norms. The stock market works on behavioural science because it goes up when Feds declares to reduce the rate and vice versa. Still, many ordinary investors are not following the market beauty are doing the opposite of what should not be done.