That’s what happened to me when I took a graduate-level class with one of my mentors in technical analysis, Dr. Hank Pruden.

For those of you who are unfamiliar with the term “technical analysis,” it refers to analyzing a market or an individual asset using charts.

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.

Today, there are many institutions that teach behavioral finance, but at the time, it was groundbreaking stuff.

One of the most important concepts is that investors’ 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.

We typically fear the worst just before things get better… and we expect things will always be this good just before they get worse.

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.

Confirmation Bias

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.

In the markets, an investor may believe that a stock is a great buy because they see the company’s products everywhere… 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.

Overconfidence

I’d bet almost everyone reading this believes they’re a better-than-average driver. In college, I had an argument with a friend about what a horrible driver he was. “How many cars have you totaled?” I asked. (The number was three in the previous four years.) “Yeah, but they were all somebody else’s fault!” he exclaimed.

Enough said.

When things are going well in the markets, investors often confuse a bull market with their own genius and think they’ll know when to get out. Of course, it doesn’t work out that way.

The Herd Effect

How many times have you been looking for a place to eat and walked past an empty restaurant to wait at a crowded one?

We’ve seen this time and again in investing, like when people piled into dot-com stocks, crypto, cannabis stocks, and meme stocks because that’s what everyone else was doing.

Being aware of these concepts can help you question your own decision making and ensure that you’re thinking critically about each buy and sell.

You can also use stock charts to test your opinion.

For example, in early 2021, AMC Entertainment Holdings (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.

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’ll recall that in 2021, no one was going to the movies. So it made no sense that everyone was piling into the stock.

Let’s 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… because when the stock stopped going higher, it was likely going to reverse quickly.

Technical analysis is simply the visual representation of investors’ emotions. The more aware you are of those emotions and behaviors and how to interpret them, the better a trader and investor you’re going to be.

The post 3 Lessons Every Investor Should Know appeared first on Wealthy Retirement.

Below, he shares a whopping 17 reasons investors should be optimistic about 2025.

– James Ogletree, Managing Editor

Recently, I’ve talked about two big reasons why I’m bullish on 2025.

The first is the productivity boom occurring in the U.S. (American workers are doing more with less.)

The second is the pro-business policies of the incoming Donald Trump administration.

(Tax cuts, deregulation, Opportunity Zones, and less government waste will ignite further economic growth and higher corporate profits.)

Yet these reasons weren’t convincing for some readers.

A few wrote to tell me it would take a lot more than that to change all the negative trends in this country.

I can only assume these are new subscribers. Because I go out of my way on a regular basis to point out that things aren’t nearly as bad as most people assume.

True, the Biden years will not be remembered fondly by millions of Americans.

The humiliating U.S. withdrawal from Afghanistan, the highest inflation in 40 years, $8.1 trillion in new debt, an unwillingness to staunch the flow of millions of illegal aliens on our Southern border, and a virtual conspiracy to hide his cognitive decline made a strong impression on voters.

(And eventually forced him off the ticket.)

Yet the state of our economy, the nation and even the world is hardly as dire as portrayed in the media – especially on social media.

A few examples:

1. The U.S. economy is the envy of the world, growing at a 3.1% annual rate in the third quarter.
2. The U.S. is the only major world economy that is growing faster post-pandemic than it was pre-pandemic.
3. Jobs are up, wages are up, and inflation – while still too high – is only a fraction of a point from the Federal Reserve’s 2% goal.
4. Unemployment is near a 50-year low.
5. The U.S. manufacturing sector has more jobs than at any time since the administration of George W. Bush.
6. There are no U.S. troops at war overseas.
7. Sweden joined NATO last year and Finland joined in 2023, making our alliance stronger.
8. Two world troublemakers – Russia and Iran – are struggling badly. Russia is losing about 1,500 soldiers a day in Ukraine. Iran has seen the devastation of two proxies – Hamas and Hezbollah – and the fall of another ally, Bashar al-Assad in Syria.
9. Despite what you see on cable news, the U.S. has the lowest violent crime rate in over 50 years.
10. Drug overdose deaths have fallen for the first time in years, plunging 17% in 2024.
11. Youth vaping is at its lowest level in a decade.
12. The obesity crisis plateaued with the introduction of injectable medications for weight loss.
13. AI is already starting to lower health care costs, improve test results and speed up drug discovery.
14. There have been several medical advances recently. The FDA approved donanemab, a new treatment for early Alzheimer’s disease. A new cervical cancer treatment shows promise. And the world’s first personalized mRNA cancer vaccine entered trials.
15. Global life expectancy continues to increase.
16. Extreme global poverty has decreased from 36% in 1990 to 9% today.
17. And U.S. carbon emissions continue to decline. They are now 17% below 2005 levels.

Yes, there are plenty of terrible things happening in the world today too.

But, as an investor, you need to balance the bad news with an understanding of the positive trends as well.

It doesn’t hurt for Westerners to stop occasionally and recognize that we are living longer, safer, richer, freer lives than any people in the history of the world.

Americans have much to celebrate, especially on the economic front.

The Federal Reserve reported last year that median household income hit a record. So did median household net wealth.

There are a record number of American millionaires.

Corporate sales and earnings are up. So are profit margins. And so are share prices.

The S&P 500 had 57 record closes last year.

My point? We’re all prone to grumble about all the things that are wrong with the world.

But if you’re going to risk your hard-earned capital in the stock market, you need to appreciate the positive developments as well.

There have always been serious problems in the world. And there always will be.

Yet, in many ways, the trend really is your friend.

But you have to realize it if you want to take advantage of it.

The post 17 Reasons Smart Investors Are Optimistic About 2025 appeared first on Wealthy Retirement.