{"id":24480,"date":"2026-01-07T10:03:45","date_gmt":"2026-01-07T10:03:45","guid":{"rendered":"https:\/\/finderica.com\/?p=24480"},"modified":"2026-01-07T10:03:45","modified_gmt":"2026-01-07T10:03:45","slug":"3-lessons-every-investor-should-know","status":"publish","type":"post","link":"https:\/\/finderica.com\/?p=24480","title":{"rendered":"3 Lessons Every Investor Should Know"},"content":{"rendered":"
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Have you ever taken a class where it felt like the professor opened up your brain like an empty Tupperware container and filled it with knowledge?<\/p>\n

That\u2019s what happened to me when I took a graduate-level class with one of my mentors in technical analysis, Dr. Hank Pruden.<\/p>\n

For those of you who are unfamiliar with the term \u201ctechnical analysis,\u201d it refers to analyzing a market or an individual asset using charts.<\/p>\n

I was expecting to learn about trend lines, bullish and bearish patterns, cycle analysis, etc., in this class. But instead, we dove deep into the psychology of the markets, trying to understand what motivates investors and traders to act the way they do.<\/p>\n

Today, there are many institutions that teach behavioral finance, but at the time, it was groundbreaking stuff.<\/p>\n

One of the most important concepts is that investors\u2019 behaviors repeat time and time again. There are no guarantees, of course, and every situation will be a little different, but humans can be fairly predictable.<\/p>\n

We typically fear the worst just before things get better\u2026 and we expect things will always be this good just before they get worse.<\/p>\n

This course taught me a number of key ideas that I still use nearly three decades later. Here are a few of the most impactful ones.<\/p>\n

Confirmation Bias<\/strong><\/h2>\n

Confirmation bias occurs when you focus only on the information that confirms your beliefs. People do this with their political beliefs all the time, and the media plays into it by exclusively giving them information that aligns with their point of view.<\/p>\n

In the markets, an investor may believe that a stock is a great buy because they see the company\u2019s products everywhere\u2026 which may cause them to ignore the fact that the stock has been in a downtrend all year. Despite the market signaling that things are not great for the company, the investor buys the stock anyway.<\/p>\n

Overconfidence<\/strong><\/h2>\n

I\u2019d bet almost everyone reading this believes they\u2019re a better-than-average driver. In college, I had an argument with a friend about what a horrible driver he was. \u201cHow many cars have you totaled?\u201d I asked. (The number was three in the previous four years.) \u201cYeah, but they were all somebody else\u2019s fault!\u201d he exclaimed.<\/p>\n

Enough said.<\/p>\n

When things are going well in the markets, investors often confuse a bull market with their own genius and think they\u2019ll know when to get out. Of course, it doesn\u2019t work out that way.<\/p>\n

The Herd Effect<\/strong><\/h2>\n

How many times have you been looking for a place to eat and walked past an empty restaurant to wait at a crowded one?<\/p>\n

We\u2019ve seen this time and again in investing, like when people piled into dot-com stocks, crypto, cannabis stocks, and meme stocks because that\u2019s what everyone else was doing.<\/p>\n

Being aware of these concepts can help you question your own decision making and ensure that you\u2019re thinking critically about each buy and sell.<\/p>\n

You can also use stock charts to test your opinion.<\/p>\n

For example, in early 2021, AMC Entertainment Holdings<\/strong> (NYSE: AMC), the poster child for meme stocks, took off. The stock moved from the $20s (split-adjusted) to over $600 in a few months.<\/p>\n

\"Chart:<\/a><\/p>\n

And keep in mind, this was not some new tech company or a biotech that had a cure for cancer. AMC is a movie theater chain. And you\u2019ll recall that in 2021, no one was going to the movies. So it made no sense that everyone was piling into the stock.<\/p>\n

Let\u2019s say you were on Reddit or some other message board reading about AMC and all the reasons it should go higher. One look at the parabolic move on the chart would tell you to be very careful\u2026 because when the stock stopped going higher, it was likely going to reverse quickly.<\/p>\n

Technical analysis is simply the visual representation of investors\u2019 emotions. The more aware you are of those emotions and behaviors and how to interpret them, the better a trader and investor you\u2019re going to be.<\/p>\n<\/p><\/div>\n