By Master Class Invest

Play Quizzes 4

“Eighty percent of the market is psychology.  Investors whose actions are dominated by their emotions are most likely to get into trouble”  Adam Smith, The Money Game

“It is more especially with respect to those unconscious elements which constitute the genius of a race that all individuals belonging to it resemble each other, while it is principally in respect to the conscious elements of their character – the fruits of education, and yet more of exceptional hereditary conditions – that they differ from each other.  Men the most unlike in the matter of their intelligence possess instincts, passions, and feelings that are very similar”  Gustav LeBon 1895

Voss Value Sees Plenty Of Opportunities In Cheap Small Caps [Exclusive]

investFor the first quarter of 2022, the Voss Value Fund returned -5.5% net of fees and expenses compared to a -7.5% total return for the Russell 2000 and a -4.6% total return for the S&P 500. According to a copy of the firm’s first-quarter letter to investors, a copy of which ValueWalk has been able Read More

“Study the psychology of the stock market as well as the elements of real value” Philip Carret

Get The Timeless Reading eBook in PDF

Get the entire 10-part series on Timeless Reading in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues.


"The psychological factors that weigh on other investor's minds and influence their actions will weigh on yours as well.  These forces tend to cause people to do the opposite of what a superior investor must do.  For self-protection, then, you must invest the time and energy to understand market psychology"  Howard Marks

"Is there, then, any area outside of such already recognised influences as business management, variations in interest rates and changes in such legislative fields as taxation, to which investors will be paying increasing heed?  I believe there is.  For lack of a better term I will call it the psychological factors affecting security prices" Phil Fisher 1960

"Psychology plays a major role in markets, and because it's highly variable, cause-and-effect relationships aren't reliable.  An investment approach may work for a while but eventually the actions it calls for will change the environment, meaning a new approach is needed" Howard Marks

"Markets affect investor psychology, but investor psychology also affects markets"  Leon Levy

"Psychological influences are a dominating factor governing investor behavior. They matter as much as—and at times more than—  underlying value in determining securities prices"  Seth Klarman

Get The Full Seth Klarman Series in PDF

Get the entire 10-part series on Seth Klarman in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues.

"Don't underestimate the importance of psychology in the stock market.  Many factors go into the buy or sell decision besides economic statistics or security analysis" Roy Neuberger

"Changes in mass psychology and in how the financial community as a whole decided to appraise the outlook either for business in general or for a particular stock can have overriding importance"  Phil Fisher

“In order to be successful, an investor has to understand not just finance, accounting and economics, but also psychology” Howard Marks

"Because sound decision making is heavily influenced by psychology, having a good grasp of the subject is vital to investment success" Allan Mecham

“My checklist is.. is it cheap?, is it a good business?,  who is running it?, and what did I miss?.  I go through all the checklist. When I go to ‘what did I miss?', it is hugely important to understand psychology and human cognition”  Li Lu

"It is important to gauge the psychology of other investors.  How far along is the current trend?, what are the forces driving it? and how much further may it have to go?" Seth Klarman

“When you get into psychology, of course, it gets very much more complicated. But it’s an ungodly important subject if you are going to have any worldly wisdom” Charlie Munger

“The discipline which is most important in investing is not accounting or economics, but psychology” Howard Marks

"Psychology  is probably the most important factor in the market – and one that is least understood" David Dreman

"Understanding how our brains work - our limitations, endless mental short cuts and deeply ingrained biases - is one of the keys to successful investing"  Seth Klarman

"Day-to-day market prices can tell you as much, if not more, about market buyers and sellers than about underlying values. Over my career, it is clear that an understanding of psychology has been as important as a degree in accounting” Bruce Berkowitz

"Stock prices move around quite a bit more than the movement in underlying intrinsic value.  Human psychology affects the buying and selling of fractions of businesses on the stock market much more than the buying and selling of entire businesses"  Mohnish Pabrai

“Mood or investor psychology is as important to markets as is information” Leon Levy

“Investing lies at the intersection of economics and psychology, the place where net present value meets greed and fear." Seth Klarman

"The investment business is one part having the right underlying philosophy, one part doing great research and analytical work, and one part a game, where you have to understand the mindset, psychology and emotions of people on the other side of the trade." Ricky Sandler

"Constant alertness, as to whether current mass psychology may be out of step with fundamentals and as to how long such a trend may continue, can help enormously in determining when to buy into an outstanding company"  Phil Fisher

“I have had the privilege of talking to some of the leading psychologists studying market decision-making. Although they have provided outstanding research identifying many behavioural errors, they have yet fully recognized just how lethal these psychological pitfalls are for investors. David Dreman

“Focussing on the quantitative is never enough. One must also have been able to integrate the soft sciences of individual and social psychology; the qualitative” Frank Martin

"The psychology of misjudgement is every bit as valuable as the thoughtful analysis of a balance sheet.  Possibly more so"  Robert Hagstrom

"To ignore the psychological component of the flux of the markets is to miss seeing the elephant in the room.  Psychology plays a role in all events in the market, from the actions of the day trader riding the momentum of Internet stocks to the broad shifts that become obvious and undeniable only over time" Leon Levy

"I came to the psychology of human misjudgement almost against my will; I rejected it until I realized that my attitude was costing me a lot of money" Charlie Munger

Get The Full Series in PDF

Get the entire 10-part series on Charlie Munger in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues.

"Pundits often speak of the psychology of markets, but in investing it is one's own psychology that can be most dangerous and tenuous" Seth Klarman

"It is crucially important not to let psychological factors interfere with economic rationality in investment decision making" Bill Ackman

"Investing is as much a psychological as an economic act"  Leon Levy

“Your biggest barrier is going to be behavioural, it’s going to be psychological.  Do you have the fortitude to think rationally when others are not?.”  CT Fitzpatrick

"The psychologist far more than the economist may be of help in deciding when to buy"  Phil Fisher

"The greatest mistakes investors make are not logical but psychological.  They neglect simple analytical disciplines that would protect themselves from their emotions"  Andy Redleaf

"At the heart of Marathon's Capital Cycle approach is the importance of behavioural factors among investors and the interaction of investor psychology, management action and business returns"  Marathon Asset Management

"You must be aware of what's going on around you in terms of investor psychology" Howard Marks

“I needed to understand psychology.  I got very interested in neuroscience, artificial intelligence and all of that, all related to decision making”  Ray Dalio

Get The Full Ray Dalio Series in PDF

Get the entire 10-part series on Ray Dalio in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues

"The most useful and practical part of psychology—which I personally think can be taught to any intelligent person in a week—is ungodly important. And nobody taught it to me by the way. I had to learn it later in life, one piece at a time. And it was fairly laborious. It's so elementary though that, when it was all over, I felt like a fool.   And yeah, I'd been educated at Cal Tech and the Harvard Law School and so forth. So very eminent places miseducated people like you and me.  The elementary part of psychology—the psychology of misjudgment, as I call it—is a terribly important thing to learn. There are about 20 little principles. And they interact, so it gets slightly complicated. But the guts of it is unbelievably important.   Terribly smart people make totally bonkers mistakes by failing to pay heed to it. In fact, I've done it several times during the last two or three years in a very important way." Charlie Munger

"Most people believe that markets are driven primarily by economic factors, and that psychology plays a minor role.  I take the position that markets are driven by both psychological and economic factors.  I owe a great debt to economists for their inability to acknowledge the degree to which psychology moves markets" Leon Levy

"This business is largely about psychology.  If you're down a huge amount, you're not thinking straight.  If the markets do something that completely surprises you, you can be a deer in the headlights.  It's a huge benefit to not have your own psychology get interrupted"  Seth Klarman

"The power of psychological influences must never be underestimated.  Greed, fear, suspension of disbelief, conformation, envy, ego and capitulation are all part of human nature, and their ability to compel action is profound, especially when they're at extremes and shared by the herd"  Howard Marks

"We simply think an attempt at understanding the psychology of the marketplace will give us a competitive edge"  Frank Martin

"It is far safer to project a continuation of the psychological reactions of investors than it is to project the visibility of the companies themselves" David Dreman'

"Investor psychology can cause a security to be priced just about anywhere in the short run, regardless of fundamentals"  Howard Marks

Updated on

No posts to display