Analysis of an Investor

Stock market investors make all their decisions based in part, usually a large part, on psychological and emotional factors. They like to think they are objective based on using a "system", i.e. fundamental analysis or charting, but in fact, even these so-called "objective" decision making tools are subjected to emotional and psychological factors. In this column, over the course of the next few months, I will detail the various emotional factors as well as the psychological ones that influence stock picking decisions. I work with a lot of Wall Street traders, analysts and stock brokers in my therapy/consulting practice. You would think the people working for the big firms would make the best financial decisions based on the amount of information and resources available to them. But you know what happens? They succumb to their own emotional and psychological limitations, such as insecurity, combativeness with fellow employees as well as restrictions of their own psychological styles which I will discuss later on. As a simple example of this, take the case where an analyst wouldn't share information with another analyst because he felt that the other analyst was making too many good calls lately and he didn't want to give him another one. He was worried about bonus time. Result: the firm missed out on a three million dollar trade. The information was there to make the decision, but psychological factors prevented it from being usable. And that is the main purpose of this blog: TO ARTICULATE THE EMOTIONAL AND PSYCHOLOGICAL FACTORS THAT PREVENT OBJECTIVE INFORMATION FROM BEING USEFUL. Every individual and every firm that I have consulted with has been able to improve their money making capabilities by reducing the emotional and psychological factors in their decision making. The only failures have been when the people involved are unwilling or, in some rare cases, incapable of making psychological changes. Next time I will discuss investor styles that affect financial decisions.

makes sense

"If you're unsure, I'm positive."