Understanding economics can enhance investment decisions by enabling better market analysis and risk assessment, leading to more informed and rational choices. However, practical experience and continuous learning are also crucial. Do you think economic knowledge leads to better investment outcomes?
Do people who understand economics make better decisions investing than those who don’t?
byu/TurquoizeWarrior inwallstreetbets
Posted by TurquoizeWarrior
48 Comments
This is a casino sir
What I’ve noticed is that the more I actually studied the economic reality, the more bleak I realize things are getting and the more bearish I become. This was true every year I traded for more than a decade. Meanwhile the market didn’t give a crap and rallied anyway, pretty much every time.
I’m now 100% convinced of 3 things.
1- fundamentals don’t really matter.
2- It’s all a ponzi scheme.
3- Trade the trend.
To be honest OP understanding economics is a great asset but most markets are made up with sheep following type of behaviours…. Im not even the one saying it Alan Greenspan did.
If there’s a remote fear that stock will crash, unless you have insider knowledge my best type of investments are long term safe and sound!
>Do you think economic knowledge leads to better investment outcomes?
I honestly don’t think this sub is what you think it is.
On average, yes. But that doesn’t mean much.
If you want to learn about investing, then focus on learning about investing. Don’t just read investment books geared towards the masses. Work your way up to graduate school level material. That will at least make you knowledgeable about the subject, but still not guarantee any level of success. You have to learn by doing and backtesting as well.
Basically all “smart” investors underperform their index over the long term. So no.
I read somewhere that economists don’t beat indexes in trading. Economists have an edge in macro but you can’t make money this way unless you understand other market mechanics.
100%
That depends if you can calculate the price elasticity of deez nuts.
“Fundamentals makes you choose the stock, and technical analysis when to enter/exit”… it was something like that 
Andre Kostolany was a vocal proponent all his life that an economic degree is less than useless in the stock market.
People who understand economics make more money investing by investing with other’s people money.
Capitalism is a lie and venture capitalists are vultures. The system is a rigged self perpetuating cycle of lies and grift.
Trade the narrative. But invest for fundamentals.
You just have know one word. Nvidia. That’s it.
No. Otherwise everyone with a degree in finances would be rolling in money. The difference between you and institutions is the amount of resources and bodies they have. But ultimately investing is either something you’re good at or not. But having a degree does at least help avoid the early levels of regardation
Line go up, I buy calls
>Understanding economics can enhance investment decisions by enabling better market analysis and risk assessment, leading to more informed and rational choices. However, practical experience and continuous learning are also crucial.
Did you not like ChatGPT’s answer so your dumbass came *here* of all places to verify it or what?
Bill Hwang comes to mind here
“Better decisions” do not always equal better returns.
Which, I think, is why we’re all here.
Lmao, do you think an understanding of economics or investment history makes you more likely to dump a ton of money in NVDA?
Yes if they apply their knowledge. But a lot of educated people choose self imposed ignorance.
Does unformarion make you a vetter invesror?
You should learn market structure and monetary policy impact on financial asset pricing (and investor sentiment as a result).
There is a nice reference in Wikipedia article on Kelly Principle.
Basically, some guys did a research on how people make trading decision.
The setup was – they invited a bunch of graduate students in finance and young associates from brokerage companies and presented them the following game.
Each is given $100 and they play “uneven” coin (computerized coin that has 60/40 outcome).
One can bet as much as they want and if they win they get double of what they bet and if they lose they lose the bet. And you can keep betting until you reach the maximum of (I forgot). The point of the game is make a strategy to win as much as you can.
Guess what – very few were able to reach the maximum. Some bet the whole sum on the first bet and some even bet it on tail ! (40% outcome) . Some started slowly and gained at the beginning yet went bankrupt anyway.
One of the quotes there (by Hemingway ) should be WSB motto :
– How did you get bankrupt ? – Slowly, then suddenly.
TL;DR : You can make regard to learn economics but it won’t stop him/her from being regard,
It provides a better foundation. It’s still up to you to build the structure.
Someone with a real understanding of economics would know that their time and money are better spent just putting it in an index fund based on the SNP 500 and to leave well enough alone. The opportunity cost related to trading is immense and very few people can do it well enough to be up in cash by end of day.
But this isn’t Micro Econ 101. This is flunking statistics and going balls deep on calls.
My college Economics professors were all broke, so no!
No, if u trade 0DTE’s, yes if you’re a macro-based investor/trader with a longer time horizon. Western economies are pretty much cyclical since 2008. Too boring for this sub to explain though.
No, economics is about saving money. This is about spending it
This sounds like something a really early version of GPT would’ve outputted. What a waste of digital space.
People who control their emotions make better decisions
Keynes was a successful investor but he was a “value” investor along the lines of Graham and Buffett. I doubt much connection can be made between his insights into economics and his investing acumen. In fact, prior to becoming a value investor he was a lousy investor like everyone else.
I flip a one-sided coin when i am making up my mind if i should buy more NVDA
I doubt it. If that were true you’d see a bunch of economist majors in investment firms. Or you’d see economists talk about the stock market, but I haven’t.
What I have seen are super dedicated people that invest their time and money in learning about new strategies and techniques that get real results.
Also there’s the fact that the stock market is price action oriented. It’s a bit more complicated than economic theories. It’s macro and micro but it’s SUPER micro like 5m charts too. Overall economics matter a lot but it’s not really the determining factor in most successful traders. By the way, almost nobody makes it past 6 month or something haha. 😆
No
I would say no, the more economics you learn the more you expect for pull backs in the market but they never happen because the market is all based on hype
What the heck does the economy have to do with the stock market?
Personally I’d rather listen to geopolitics like Peter Zeihan. The market isn’t based on economics.
Not sure my parents broker lost 30% and I’m up 20%.
It’s useful in that it can help you understand the reasons for trends and some movements in markets.
When it comes to trading, though it’s useless. Trading short term is all about what’s happening now and can be unpredictable.
Really though, economic degrees are about studying human behavior and national trends. It doesn’t really study investments or companies. Also have to remember that even with that knowledge some people aren’t good at picking stocks.
Finance majors have a leg up as they’re taught market trends and theory and all that bullshit.
One thing that stuck with me that my finance professor said was this.
At the end of the day it’s still a gamble. You’ll have better luck throwing a dart at a wall of stock tickers and picking from there.
Finance and econ majors can MAYBE have a 60% chance of not losing out on a stock. But I’m talking about the best; the ones that get paid 500K a year as a consultant for whatever fuck bank is active.
That and they actually teach how to do options. It goes so much deeper than all the naked calls and puts I see on here.
So many people have no idea what playing on margin actually means.
No, because everyone would become an economist
I only understand Bidenomics and down $69,420.69
You need more than economics. You need some game theory and need to understand how politics works. After politicians make ALL the wrong choices, fuck everything up, and are completely out of options, THAT is when you break out the economics knowledge.
Remember that monkey that threw darts and outperformed most professional investors?
I don’t think that monkey studied economics.
96% of “professionally” managed funds don’t outperform just buy and hold S&P.
Do you think you’re smarter than 96% of professional investors who manage multi millions/billions of dollars?
If not, no, your knowledge of economics isn’t going to help you much.
Yes, but requires discipline. How do you think Warren Buffett got his billions?