I have written in the past about having been very fortunate to have read some extraordinary business and investment books over my career. Today I want to put in a good word for one book that will surely help every Minnesota investors improve their investment decisions.
In his great book, “The Wisdom of Crowds, “ New York Times staff writer James Surowiecki suggests that the collective wisdom of a crowd of people is greater than even the smartest individual person in that crowd.
This book is part psychology, part behavioral economics, and part investment history. The author weaves all these important investment concepts together, and gives the reader great examples of how large groups of people can make much better investment decisions than a handful of stock market experts.
The price of any investment is always controlled by supply and demand. If there are more buyers than sellers, the price will rise. Conversely, if there are more sellers than buyers, the price will fall. Stocks, bonds, gold, wheat, cattle or gasoline; this single economic truth is always present.
The crowds in the U.S. stock markets have taken prices to four-year highs recently. As you would expect, the financial media is running all over themselves with this news.
The stock market has been the place to have been invested over the last few months. As you will understand from the book, the reason for this recent stock market advance is that a large number of people have kept their money invested in U.S. stocks.
If you keep your long-term stock market investments in sync with the crowds, you will be successful in growing your money. When the stock markets are supporting higher prices, you should be invested in the stocks.
For now, all is well with stock market investors. This condition will not last forever.
Ric Lager
Lager & Company, Inc.
