Most investors are rational; like most politicians are honest. So, if you fancy yourself one of the rational crowd, shouldn’t you be raking in the returns right now.
Too Smart By Half
“The problem with being smart, is waiting for the rest of the world to catch up with you.” – Jeff Macke (Fast Money on CNBC)
Should we accept this statement as true, we can infer that, to successfully time an investment, we must ask ourselves, “What event(s) will affect market psychology or, in other words, what will cause the tipping point?” br>
We can also state that the general liquidity of the asset in question should affect our decision.
Repressing Market Sentiment
Our answer to this answer should inform our investment decisions and strategy relative to the event(s).
So, what indicators should we ‘rational’ investors monitor? We’ve all heard of the “Magazine Cover Effect” and the “CNBC Effect“, but what are some other events indicating market psychology has gone askew? Market technicians should have a ball with this question.