An important step towards becoming a smart investor is your ability to question almost everything. When you get a hot tip in the market, question its logic. When your broker gives a buy or sell call, learn to question it. When you read the latest news on a company, ask how it can impact you. Also, when you expect prices to go up and they don’t, question yourself, if you are missing out on a message from the market.
More you question, more you get
We have all heard of the proverbial herd mentality in markets. Most people tend to follow others when they find them making profits on trades. It does not matter that you do not understand anything about the stock. It also does not matter that the stock is priced at a ridiculously high P/E ratio. It also does not matter that you never made money by jumping on the bandwagon. Welcome to herds! Continue reading