Arrogance in Investing Can Be Costly: Falling Stocks (Research on Investing and Decision Making)

Arrogance in investing can be costly! When it comes to investing and making business decisions it is important to not make isolated choices without considering what others might think about the options. Sometimes as we move up the ranks in society we fall victim to the delusion that we are more aware and more knowledgeable than others around us. 

Source:Conceptual model and hypotheses.
Credit: Journal of Consumer Research (2022). DOI: 10.1093/jcr/ucac054

For investors, CEOs, and executives that can be costly! Especially costly if you are dealing with others' money and a lot of people rely on those resources to make their mortgage payments and put food on their table. Executives have responsibilities to society beyond themselves and should think about where and how they invest resources (Less of an argument if you are investing for yourself and more of an argument if you are investing government or corporate resources to create net positives for society.). 

Over the years I have learned that important decisions should not be made in a vacuum without considering the various other perspectives that can create a 360 degree view of an issue and its solutions. While that applies to many different facets of life, it does seem to resonate with important institutional decisions. Choices should be well thought out and they should consider some of the big contingencies.

Let me put a disclaimer, I'm a kind of student of the business world (You never stop learning!), have some business-owning experience, and do dabble in investments from time to time. Personal maybe philanthropic interests have brought me back into the markets again (Yes I'm getting old and thinking about the next generation) I will again write about investing in general (Basically, talk to your investor and don't listen to me unless I make sense! Your choices are your choices and I have nothing to do with. Invest in organic horse manure, I don't care!).

 

Trust me that falling stocks suck! I once put some money into a stock and it went to almost zero a few months after. Obviously I got something wrong. 🤷 This research says that one of the reasons why I did this was that I was overconfident and new to investing. Personally, I think it is because I didn't go read enough and listen to seasoned people. Again, it wasn't much money so I just shrugged it off, however I have learned over the years the importance of doing your homework. Keep your nose in the books!

(Also, I'm thinking through a process to help best select stocks with the greatest potential values that are in alignment with emerging trends. Its not as easy as you think but I have a few ideas bubbling.)

New research suggests that investors who make decisions with others are half as likely to bet on falling stock prices

Dominik M Piehlmaier et al, The One-Man Show: The Effect of Joint Decision-Making on Investor Overconfidence, Journal of Consumer Research (2022). DOI: 10.1093/jcr/ucac054