For long term investing it’s a huge benefit. Agree that it’s fucking useless for trading lmao! Unless you studied quant finance (specifically options pricing) as part of your degree.
Ec9n major here. It is a HUGE benefit that can't be understated. It baffles me some of the things my peers do that goes against economic principles. Many tell me it is a fake science and I can never find enough words to explain that it is a *social* science and that understanding behavioral economics, or how people in aggregate make decisions, can lead to good decision making over the long run.
*"The interest rate is going to go down next year anyway, so I'm not bothering buying a house yet."* - friend, while I was house hunting in March 2023. I bought a house in April.
Not sure I want to unpack all the reasons that was a shit comment to make, but we see the results.
*"The economy is crap, so this market is about to tank. I'm staying all cash until the correction."* - financial advisor friend in summer of 2022. I bought JPM shares and increased my position in AMD instead.
Not even sure what they meant by economy being crap since all the data I was observing showed a strong economy built on a new foundation of stability as people oriented themselves into new jobs.
*"There's a bunch of layoffs happening; I'm staying out until it drops."* - friends while I was on vacation in 2022, who claimed they work in HR and it's brutal. I responded that it was concentrated in tech, was because they overtired to siphon competition, and that the severance packages would result in those workers landing on their feet since the net job gains were higher over the past 2 years, implying that said workforce were still growing and just getting efficient.
The big one is that the inflation was happening in asset markets the past decade or so, and when people started complaining about the inflation of consumer goods I tried to explain that many people are still well off, they just are shifting to more cash on hand which will keep sales alive even if share volume movement shows decreases.
Can you elaborate more on the first anecdote? Like what were the factors that led you to disagree with your friend back then and buy the house? Was it simply the fact that real estate was anyway inflating and would rise enough to nullify any interest rate drop? Or the obvious fact of refinancing later when it does drop?
I’m not agreeing or disagreeing, just curious to know what the thought process was. I’m in a position myself where I feel like I *can* buy a house, feel the interest rates are too damn high but that if they drop I can refinance.
Based on my research, there was a negative 10 percent chance of an interest rate drop, and I was still furious about the rate drop in 18/19 back to zero.
I repeatedly told them that the data doesn't support any drops and that, if anything, Americans were wealthier than ever before. Median wage growth, wage growth of low wage low skill labor, and the jobs reports paired with other stuff like foreclosures and velocity of money.
At my core, I knew that many a few people got really, really good paying jobs in 2021-23 and only wanted to focus on the inflation. Well, you don't talk with your Twitter updates and Facebook posts. You talk with where you spend your money, and people were spending like crazy. Needed fiscal policy to step in and I *knew* everything would get blocked.
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.
Were you high during all your econ classes? The inevitable conclusion is you buy index funds unless you have an edge (inside knowledge, high barrier to entry tech, or first mover on new theory).
Add 4. Only the Sith deal in absolutes.
Fundamentals still matter, but you just can’t examine it from a boomer perspective.
$PANW is dropping but $CRWD is rising. It doesn’t make much sense from P/E or balance sheets, since it’s all about that growth/guidance.
I think that’s because the world is moving faster. Back in the day you need pigeons to deliver messages, but now everything is available at fingertips before we decide it’s a totally smart idea to plug chips into your cortex.
I believe you may be conflating trading with investing. Daily/weekly, fundamentals may be and often are completely decoupled from fundamentals. This is short term treading. Long term investing, however, fundamental measures of value will almost always converge to market value. Not always. But far more often than not. Time horizons may vary, and not all companies trade according to the same, equally weighted, fundamental value measures.
I originally went in for economics, came out as finance. You can do all the Lagrangian bullshit you want, it's all based on half-baked assumptions, and all the while, people want to buy Stanley cups because it's cool. Economics is a bullshit subject that masquerades as a science. If people were logical, then Apple wouldn't be worth a shit. Supply and demand, right? Price goes up, demand goes down? Turn outs people like to flaunt wealth. Good luck incorporating that shit into your model.
“People like to flaunt wealth” - turns out economists just figured this out in (checks notes) 1899. This is specifically referred to as a “Veblen Good”.
https://en.wikipedia.org/wiki/The_Theory_of_the_Leisure_Class?wprov=sfti1
Behavioral economics and game theory are also well established fields that all help to explain the people’s decision making.
>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?
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.
Economics can be an advantage in 3 areas:
1 - timing the bond markets
2 - timing currency trades
3 - thinking you’re smarter than everyone else and blowing those gains on FD’s
#3 is definitely the most common outcome. The worst thing that can happen to you is believing you're dope at trading. That's why winning your first trade is the worst thing that can happen to you.
This is like asking whether someone who has a Ph.D. in physics can be a better forward pass in the NFL than someone who dropped out of high school. Having an understanding of how something work on economic macro-scale does not carry over in practical application with uncertainties and human emotions like investing.
Look, look, let me break it down for you. Understanding economics and going into the stock market is like you putting on a bomb suit before trying to defuse a massive car bomb. Not understanding economics and going into the stock market is you going in to defuse that car bomb without any protection whatsoever. The only difference is an open or closed casket funeral
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!
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,
I don't get it, do they know which side is 60 % odds and which one is 40 %?
Or do they play randomly and one side has 60 % and the other 40 %?
Because I don't believe if it's the first case there can't be relatively simple maths on how to profit it...
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
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.
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.
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 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. 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
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.
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.
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.
There's a whole school of thought that dominates much of college education around economics that gets a lot wrong. So no, they don't generally even know the thing they think they do.
I think it helps people avoid making stupid mistakes. But if people overestimate their economics knowledge, they can also end up making stupid mistakes. So in summary, for 99%+ of people, if the lesson they take from it is that they have no real edge on the market, then they will do well. If they think they can use their economics knowledge to outperform the market, they will lose in the long run.
I've seen Harvard econ professors jumping on CNBC and just being completely wrong. As in, the market ends up doing the exact opposite of their prediction. So the idea that a basic understanding of economics is going to let you outperform the market actively trading is laughable.
But again, this is a casino dogg.
People who understand economics tend to make better macro decisions which impacts longer-term investment decisions but not necessarily the day-to-day of the markets. Over the short-term markets tend to be more about psychology than anything else, and that's where there's a disconnect. That's why on an given day you witnessed a bunch of pissed off nerds in here, pushing up their glasses, and going on some stupid shit about how "illogical" it is that a stock defies valuations. And that's what's so hysterical: the rest of us don't expect logic from the markets.
one of the smartest people I know told me to sell everything in 2022 because ukraine war, the global supply chain yadda yadda
i had 140 nvda i sold at 180.
never listen to anyone. just follow the fucking trend.
Not anymore the best stocks and investment have no basis on economics. look at the guys who made it like kitty.
Anyone with a sense of reality sold nvda a long time ago and bought stuff that fell 50%
No because human beings are emotional which impacts their decision making, especially when it comes to managing their own money. Plus understanding economics doesn’t always mean you can make accurate predictions. Welcome to the casino!
Sooner you realize economics is worthless and that all the "pundits" are chronic losers in the market the better. They get rich off appearances and fees not from trading. Just track any one of their predictions and it's almost always gone the other way.
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.
Not that it cannot be done, well I hope atleast because I am trying but the only person who I know who is a profitable trader long term went to uni for finance and got a master's in something related.
By itself an economics degree is useless for trading because the economy isn't the sock market. The economy contributes to the stock market success. The fed which is generally made up of economists is the single biggest mover of the markets.
Economics is good for understanding currencies. Currencies are the basis of stock trading. Once you understand that the current price of a stock is its past performance and its future performance then you can make better decisions. But not everyone is going to understand which becomes an arbitrage.
I'd say they make worse decisions. The market breaks well before economic conditions deteriorate (1929, 1987, 2000, 2008); someone with a good understanding of economics would rationalize that everything is fine all the way down instead of selling.
I mean just because you understand something and can think through it , it doesn’t mean that you will always be logical and be immune to doing sporadic emotional bullshit at the casino lmao
I have a bs in economics (for whatever small amount that’s worth, I do not work in the field), but do almost no “active” trading (I’m mostly on this sub for entertainment and the rare pick). As far as the market, I’m mostly in mutual funds and index funds with a small amount dedicated to generic “growth” in generally safe positions. Almost no “gambling”, and when I do it’s with small amounts. I’ll never make the crazy gains you see, but I’m also unlikely to have the major losses either (unless the whole things crashing). I just don’t have the time/energy to put into this along with all the other work and hobbies I do, and honestly that’s probably for the better lol
helps coping more with your decissions but can't beat luck then again minimizing risk and protecting downside it is okish and helps you beat I would say 80% of people
It really helps, for instance you could have made a lot of money when Turkish President Erdogan announced he will lower interest rates in 2020. Most people did not even understand what that meant and what the conequences would be, he kept lowering them for 3 years and most people did nothing despite this being the opportunity of the decade (bigger than even Nvidia right now).
Most people have little economics knowledge and think that buying a house and selling it a decade after is the absolute best investment ever, and that stocks are worst than the casino and you can lose everything in seconds even with normal shares.
But there's also investment bankers who do terrible and catastrophic mistakes but they tend to do way better overall.
I think that overall, the more knowledge you have, the more opportunities you'll get or detect.
No, but it can add some level of understanding. Just like understanding accounting can give you an understanding of the company is doing. It’s still a risk it helps mitigate some risk but you definitely can absolutely know what you’re doing and still make the wrong decisions. Because there is still risk. And that’s with long term, short term you are still almost yoloing, you can predict all you want but there’s still other people who can have more fuck you money and just piss all over your prediction
I was just thinking this, and scrolled in to this question. The answer is yes. Debt avoidance is wealth creation. Allowing yourself the space and time to work for yourself is wealth creation.
The trick in America, I have seen so, so many people wash out reaching for the stars. You will die on your shield month to month, in a slow agonizing loss. Get a small house in a LCOL area. Pay that house off.
The choice of your lot, how much house you bought, and the taxes of the State you purchased it in are all wealth creation. Allowing yourself the ability to exist beyond the day to day grind is how you start to get free.
As far as a casino with options. I lost my ass with options in 2008. Triple witching reits.
I said no more voodoo investing, and went half in real estate on the dip, and the other half in Publix stock, and forced myself to focus on myself.
I am still a fat piece of shit, but my day to day life looks like The Godfather walking around his orange groves, its very peaceful.
This is literally the meme where high and low IQ agree. That aside, the more you know economics, the more likely you are to just buy index funds and give up on picking stocks entirely.
i have a degree in economics. stocks rarely move as intended due to economic factors. typically macroeconomics factor into price action on a longer term scale. it might make data reading a little easier to understand but stocks move on their own with no regard to economic readings
The market can stay irrational longer than I can stay liquid…
I’d assume most of the people who under economics are more on the buffet side of buy and hold than on options plays…
Compound interest is a helluva drug.
There are smart, informed decisions, and successful decisions. Well.. or people for that matter.
They do not necessarily have to be the same.
And especially when speculating, it is often better to do dumb stuff early enough. Because most players in the markets also lack information, draw the wrong conclusions, or are blinded by greed. A lot of what they invest in might, in the long run, crash. But until then it will yield a shitload of profit.
Sub-Prime, Tesla, the 5387th cryptocoin...
My humble opinion is short term options trading is completely dependent on public and investor hysteria. Everything else? Just buy whatever company makes desirable products
No. As a holder of an economics degree (though I didn’t study it for any of the reasons you listed), I don’t think my knowledge in economics helped me at all in stock trading. I bought a crap ton of NVDA stocks a while ago, because I work in research, and many research in our field use softwares that only run on NVDA chips. That was a biased view of mine and making money from it was a pure coincidence.
My Econ degree did help me understand real estate market and led me to stock trading for what it’s worth. And I do like to keep up with popular company news or economic news, because I want to live up more to my degree.
It depends on the level of understanding. An all knowing godlike figure yes. A person with a bachelor's is probably going to "over fit the curve" and think they understand something when they really don't and lose money. Then they get frustrated and post memes here
I haven't seen any billionaire economist. The last time they tried, they spectacularly crashed the fund, and almost brought down the whole financial systems with them (LTCM). Ironically, LT stood for long-term lol.
I'm studying MSc. Economics and from my experience, it does help in longterm investing and positional trading like the government publishes the unemployment rate and interest rate, etc affects the business and people spending power stocks related to it.
It's not just studying but analysing the real world (macroeconomics and geopolitics) also. If you want me to go deep, i can go on and on and on.
A latest example for macroeconomics is increasing debt of US and how government is delaying it (till elections) by printing more and more money causing the stock market and overall inflation high. See the gold reserves of all countries, they are buying more gold because they know US economy is going to go down and they are protecting themselves.
https://youtu.be/lyqy5VdweDM?si=jKIc47MWN0OiL0Qe
I have examples of geopolitics too but it will be too long
Speaking from personal experience, yes absolutely. Some decisions my finance major friends make and their justifications are ass backwards to me. But that's because *economics* can be ass backwards to STEM oriented minds.
I'm up 20% on my gambling investment account lifetime and it just seems "easy." My Roth is only 10% and uses the ETF buy and hold strategy. My gambling account is buy and hold as well, but through individual stock picks.
When speaking with friends, they analyze decisions completely differently than me. I use principles and market analysis and they try showing me technical things such as 52 week trends and daily volume. Overthinking it comes to mind. Why aren't we looking at earnings reports and competition in the market sector? Growth of the company etc etc.
Economists that are good at what they do inevitably end up managing money and they stop being talking head style economists. That’s the long and short of it. If you’re even 1% better at making predictions than the market, you can make a much better and scalable living in the market.
The dumber you are in the stock market, the more money you will make.
An economic degree trends towards macro bearish. I.e. the more you know, the more you will take yourself out of an investment.
My brother is an economist and has amassed a net worth around $2 mil by being a diligent buy and hold index investor. He truly believes that over time markets are pretty efficient and that his best bet is to tune out and let them do their thing.
I studied economics but was drawn to entrepreneurship. My firsthand experience is that many people make irrational decisions much of the time. I’ve amassed a net worth many times larger than my brother’s. But I’ve had big swings in net worth in my younger years. But in recent years those swings have subsided. For instance, in 2022 my net worth increased whereas many people lost money.
Long story short, knowing some economics is very helpful. Adherent to it religiously won’t necessarily help you achieve outsized returns if that’s your goal.
To be honest, people who try to swing trade based on economics tend to do regarded things because they outsmart themselves.
At the end of the day, it’s just a fancy way to underperform.
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This is a casino sir
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Sir this is a Wendy's
holy hell
New response just dropped
It’s a casino if you’re doing options. Otherwise it’s very easy to profit
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Very true lmaooo
https://preview.redd.it/uncgz8e2bv6d1.jpeg?width=2270&format=pjpg&auto=webp&s=a7ef107be276edf8fa07ac71bca6eb6a7e0e6a8e
Made me laugh
Andre Kostolany was a vocal proponent all his life that an economic degree is less than useless in the stock market.
I have an Economics degree and can confirm that this is true. Maybe for long term investing it might have some benefit, but for trading, nope.
For long term investing it’s a huge benefit. Agree that it’s fucking useless for trading lmao! Unless you studied quant finance (specifically options pricing) as part of your degree.
Ec9n major here. It is a HUGE benefit that can't be understated. It baffles me some of the things my peers do that goes against economic principles. Many tell me it is a fake science and I can never find enough words to explain that it is a *social* science and that understanding behavioral economics, or how people in aggregate make decisions, can lead to good decision making over the long run.
what are some common mistakes you see that go against economic principles, if you don't mind sharing
*"The interest rate is going to go down next year anyway, so I'm not bothering buying a house yet."* - friend, while I was house hunting in March 2023. I bought a house in April. Not sure I want to unpack all the reasons that was a shit comment to make, but we see the results. *"The economy is crap, so this market is about to tank. I'm staying all cash until the correction."* - financial advisor friend in summer of 2022. I bought JPM shares and increased my position in AMD instead. Not even sure what they meant by economy being crap since all the data I was observing showed a strong economy built on a new foundation of stability as people oriented themselves into new jobs. *"There's a bunch of layoffs happening; I'm staying out until it drops."* - friends while I was on vacation in 2022, who claimed they work in HR and it's brutal. I responded that it was concentrated in tech, was because they overtired to siphon competition, and that the severance packages would result in those workers landing on their feet since the net job gains were higher over the past 2 years, implying that said workforce were still growing and just getting efficient. The big one is that the inflation was happening in asset markets the past decade or so, and when people started complaining about the inflation of consumer goods I tried to explain that many people are still well off, they just are shifting to more cash on hand which will keep sales alive even if share volume movement shows decreases.
interesting anecdotes, thanks
Can you elaborate more on the first anecdote? Like what were the factors that led you to disagree with your friend back then and buy the house? Was it simply the fact that real estate was anyway inflating and would rise enough to nullify any interest rate drop? Or the obvious fact of refinancing later when it does drop? I’m not agreeing or disagreeing, just curious to know what the thought process was. I’m in a position myself where I feel like I *can* buy a house, feel the interest rates are too damn high but that if they drop I can refinance.
Based on my research, there was a negative 10 percent chance of an interest rate drop, and I was still furious about the rate drop in 18/19 back to zero. I repeatedly told them that the data doesn't support any drops and that, if anything, Americans were wealthier than ever before. Median wage growth, wage growth of low wage low skill labor, and the jobs reports paired with other stuff like foreclosures and velocity of money. At my core, I knew that many a few people got really, really good paying jobs in 2021-23 and only wanted to focus on the inflation. Well, you don't talk with your Twitter updates and Facebook posts. You talk with where you spend your money, and people were spending like crazy. Needed fiscal policy to step in and I *knew* everything would get blocked.
What are good places to find this kind of data? (growth in specific metrics)
Even then, quant finance is more useful for those working in the sell side than buy side.
I spoke to him and he changed his mind.
>an economic degree is less than useless ~~in the stock market~~.
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.
I’m an economist, and the only thing I’d add is 4 - you can beat the market, but never Nancy pelosi
You can beat Paul pelosi, but only once
🔨
That you sweet DePape? Nancy ain't home and I left the backdoor unlocked again. I'll wait for you while I have a cocktail
Well done
Were you high during all your econ classes? The inevitable conclusion is you buy index funds unless you have an edge (inside knowledge, high barrier to entry tech, or first mover on new theory).
Add 4. Only the Sith deal in absolutes. Fundamentals still matter, but you just can’t examine it from a boomer perspective. $PANW is dropping but $CRWD is rising. It doesn’t make much sense from P/E or balance sheets, since it’s all about that growth/guidance. I think that’s because the world is moving faster. Back in the day you need pigeons to deliver messages, but now everything is available at fingertips before we decide it’s a totally smart idea to plug chips into your cortex.
Crowdstrike sounds better than pan alto Walto so I buy crwd
Dont forget about the eagle in their logo.
It’s actually a Falcon.
I believe you may be conflating trading with investing. Daily/weekly, fundamentals may be and often are completely decoupled from fundamentals. This is short term treading. Long term investing, however, fundamental measures of value will almost always converge to market value. Not always. But far more often than not. Time horizons may vary, and not all companies trade according to the same, equally weighted, fundamental value measures.
I originally went in for economics, came out as finance. You can do all the Lagrangian bullshit you want, it's all based on half-baked assumptions, and all the while, people want to buy Stanley cups because it's cool. Economics is a bullshit subject that masquerades as a science. If people were logical, then Apple wouldn't be worth a shit. Supply and demand, right? Price goes up, demand goes down? Turn outs people like to flaunt wealth. Good luck incorporating that shit into your model.
“People like to flaunt wealth” - turns out economists just figured this out in (checks notes) 1899. This is specifically referred to as a “Veblen Good”. https://en.wikipedia.org/wiki/The_Theory_of_the_Leisure_Class?wprov=sfti1 Behavioral economics and game theory are also well established fields that all help to explain the people’s decision making.
Sent from my iPhone
Clearly you have no understanding of economics lmao, you went in and studied a whole 3 concepts
Or maybe, just maybe, things aren’t as bad as they seem?
It does feel like a Ponzi scheme. The explosion is going to be epic.
What explosion? A gigadip/breakdown of the stock market will just catapult up for the ones with cash. No worries if you are long.
I do remember all the people with signs in 1929 reading "no worries, I'm long."
Sounds like you're ready to trade crypto
>Do you think economic knowledge leads to better investment outcomes? I honestly don't think this sub is what you think it is.
>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?
🤣 ☠️ That’s exactly what happened here.
More like an AI karma bot
That depends if you can calculate the price elasticity of deez nuts.
What about LGMA?
LGMA is a fantastic stock.
LGMA nuts
LGMA fat stock
Lmao, do you think an understanding of economics or investment history makes you more likely to dump a ton of money in NVDA?
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.
What would you say those mechanics of focus would be? Top 3
Economics can be an advantage in 3 areas: 1 - timing the bond markets 2 - timing currency trades 3 - thinking you’re smarter than everyone else and blowing those gains on FD’s
#3 is definitely the most common outcome. The worst thing that can happen to you is believing you're dope at trading. That's why winning your first trade is the worst thing that can happen to you.
This is like asking whether someone who has a Ph.D. in physics can be a better forward pass in the NFL than someone who dropped out of high school. Having an understanding of how something work on economic macro-scale does not carry over in practical application with uncertainties and human emotions like investing.
"Fundamentals makes you choose the stock, and technical analysis when to enter/exit"... it was something like that 
"Wheel of Fortune and astrology" What a combination.
Better off buying rocks and claiming they have healing powers.
Trade the narrative. But invest for fundamentals.
Basically all "smart" investors underperform their index over the long term. So no.
Line go up, I buy calls
The more it goes up, the more calls you buy
Not sure my parents broker lost 30% and I'm up 20%.
No, your parents lost 30% because they trusted a "professional stock picker". Your parents broker earned money in the process.
My college Economics professors were all broke, so no!
Can confirm
People who understand economics make more money investing by investing with other's people money.
I.e. fees
Look, look, let me break it down for you. Understanding economics and going into the stock market is like you putting on a bomb suit before trying to defuse a massive car bomb. Not understanding economics and going into the stock market is you going in to defuse that car bomb without any protection whatsoever. The only difference is an open or closed casket funeral
If I buy, price go down. If I sell, price go up. They don't teach you that in any economics class, but I know it to be true.
The idea that economists understand anything is hilarious. How cute.
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!
Bill Hwang comes to mind here
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,
Frankly, finance graduate not able to calculate the optimal strategy for this game should not exits.
I don't get it, do they know which side is 60 % odds and which one is 40 %? Or do they play randomly and one side has 60 % and the other 40 %? Because I don't believe if it's the first case there can't be relatively simple maths on how to profit it...
People who control their emotions make better decisions
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
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.
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.
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 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. 😆
Just like the casino the less you know the better you play.
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
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.
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.
There's a whole school of thought that dominates much of college education around economics that gets a lot wrong. So no, they don't generally even know the thing they think they do.
They probably take less stupid gambles, however, sometimes stupid gambles pay off big.
I think it helps people avoid making stupid mistakes. But if people overestimate their economics knowledge, they can also end up making stupid mistakes. So in summary, for 99%+ of people, if the lesson they take from it is that they have no real edge on the market, then they will do well. If they think they can use their economics knowledge to outperform the market, they will lose in the long run. I've seen Harvard econ professors jumping on CNBC and just being completely wrong. As in, the market ends up doing the exact opposite of their prediction. So the idea that a basic understanding of economics is going to let you outperform the market actively trading is laughable. But again, this is a casino dogg.
DJT
People who understand economics tend to make better macro decisions which impacts longer-term investment decisions but not necessarily the day-to-day of the markets. Over the short-term markets tend to be more about psychology than anything else, and that's where there's a disconnect. That's why on an given day you witnessed a bunch of pissed off nerds in here, pushing up their glasses, and going on some stupid shit about how "illogical" it is that a stock defies valuations. And that's what's so hysterical: the rest of us don't expect logic from the markets.
It absolutely did not help me this past 2 years I was bearish and got fucked when all I had to do is go all in long like a monkey
If you want to make good investing decisions go to r/bogleheads because this sub is for gambling
one of the smartest people I know told me to sell everything in 2022 because ukraine war, the global supply chain yadda yadda i had 140 nvda i sold at 180. never listen to anyone. just follow the fucking trend.
Not anymore the best stocks and investment have no basis on economics. look at the guys who made it like kitty. Anyone with a sense of reality sold nvda a long time ago and bought stuff that fell 50%
No For some reason people who understand economics are prone to be macro bears and macro bears have a losing track record
My 11 year old son can throw darts at a board and probably do as well as at least 50% of the regards here
No because human beings are emotional which impacts their decision making, especially when it comes to managing their own money. Plus understanding economics doesn’t always mean you can make accurate predictions. Welcome to the casino!
Sooner you realize economics is worthless and that all the "pundits" are chronic losers in the market the better. They get rich off appearances and fees not from trading. Just track any one of their predictions and it's almost always gone the other way.
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.
No, economics is about saving money. This is about spending it
If the market was rational then they probably would, alas it is not which means that all the principles learned don’t actually regularly apply.
What the heck does the economy have to do with the stock market?
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).
It provides a better foundation. It's still up to you to build the structure.
I flip a one-sided coin when i am making up my mind if i should buy more NVDA
No
Personally I’d rather listen to geopolitics like Peter Zeihan. The market isn’t based on economics.
No, because everyone would become an economist
Yes, but requires discipline. How do you think Warren Buffett got his billions?
Yes, 100%. And it only takes a few books and a few hours to get to a decent enough level to make better decisions.
Not that it cannot be done, well I hope atleast because I am trying but the only person who I know who is a profitable trader long term went to uni for finance and got a master's in something related.
Long term yes. Educated guess is better than gamble.
No — because information asymmetry is a bitch.
It helps you understand how it’s supposed to work. But experience will tell you, that’s not how it works.
Yes you can know all economics but no one knows what can happen tomorrow. This is a different skillset I think.
Melvin Capital lost to Dumb Money so no
No, they can just exploit the loopholes better.
If you trade in commodities, then yes.
By itself an economics degree is useless for trading because the economy isn't the sock market. The economy contributes to the stock market success. The fed which is generally made up of economists is the single biggest mover of the markets. Economics is good for understanding currencies. Currencies are the basis of stock trading. Once you understand that the current price of a stock is its past performance and its future performance then you can make better decisions. But not everyone is going to understand which becomes an arbitrage.
I'd say they make worse decisions. The market breaks well before economic conditions deteriorate (1929, 1987, 2000, 2008); someone with a good understanding of economics would rationalize that everything is fine all the way down instead of selling.
I mean just because you understand something and can think through it , it doesn’t mean that you will always be logical and be immune to doing sporadic emotional bullshit at the casino lmao
Just stick to the high time frame charts and see the macro specs on what you want to invest in
People who can read a balance sheets and understand what makes a business profitable make better investing decisions.
Economics based on an assumption that “market is efficient when everyone has perfect information”. But we don’t.
I have a bs in economics (for whatever small amount that’s worth, I do not work in the field), but do almost no “active” trading (I’m mostly on this sub for entertainment and the rare pick). As far as the market, I’m mostly in mutual funds and index funds with a small amount dedicated to generic “growth” in generally safe positions. Almost no “gambling”, and when I do it’s with small amounts. I’ll never make the crazy gains you see, but I’m also unlikely to have the major losses either (unless the whole things crashing). I just don’t have the time/energy to put into this along with all the other work and hobbies I do, and honestly that’s probably for the better lol
Regard-in-training came to the right place to show off his lack of progress.
No. Source: can economics. Cannot invest for the life of me. I'm always 5 years ahead of when something is profitable, and give up before it is.
No. The economy is very different from the stock market in terms of correlation.
helps coping more with your decissions but can't beat luck then again minimizing risk and protecting downside it is okish and helps you beat I would say 80% of people
Nope. There was one kid on here back in 2021 who turned like 4-5k into 700k on Tesla.
It really helps, for instance you could have made a lot of money when Turkish President Erdogan announced he will lower interest rates in 2020. Most people did not even understand what that meant and what the conequences would be, he kept lowering them for 3 years and most people did nothing despite this being the opportunity of the decade (bigger than even Nvidia right now). Most people have little economics knowledge and think that buying a house and selling it a decade after is the absolute best investment ever, and that stocks are worst than the casino and you can lose everything in seconds even with normal shares. But there's also investment bankers who do terrible and catastrophic mistakes but they tend to do way better overall. I think that overall, the more knowledge you have, the more opportunities you'll get or detect.
https://www.forbes.com/sites/rickferri/2012/12/20/any-monkey-can-beat-the-market/
Got money = no Wendy’s. Broke = Wendy’s. Trickle down BJ’s.
>If you spend 13 minutes a year on economics, you've wasted 10 minutes -Peter Lynch
I think it can help one develop better and more sound conviction in their investment decisions
People who claim to understand economics are full of shit. Poker players understand human behavior and are far superior investors
No sir
No, but it can add some level of understanding. Just like understanding accounting can give you an understanding of the company is doing. It’s still a risk it helps mitigate some risk but you definitely can absolutely know what you’re doing and still make the wrong decisions. Because there is still risk. And that’s with long term, short term you are still almost yoloing, you can predict all you want but there’s still other people who can have more fuck you money and just piss all over your prediction
I was just thinking this, and scrolled in to this question. The answer is yes. Debt avoidance is wealth creation. Allowing yourself the space and time to work for yourself is wealth creation. The trick in America, I have seen so, so many people wash out reaching for the stars. You will die on your shield month to month, in a slow agonizing loss. Get a small house in a LCOL area. Pay that house off. The choice of your lot, how much house you bought, and the taxes of the State you purchased it in are all wealth creation. Allowing yourself the ability to exist beyond the day to day grind is how you start to get free. As far as a casino with options. I lost my ass with options in 2008. Triple witching reits. I said no more voodoo investing, and went half in real estate on the dip, and the other half in Publix stock, and forced myself to focus on myself. I am still a fat piece of shit, but my day to day life looks like The Godfather walking around his orange groves, its very peaceful.
Having a rough idea of how the economy works is probably better than having 0 idea and investing based off reddit comments.
This is literally the meme where high and low IQ agree. That aside, the more you know economics, the more likely you are to just buy index funds and give up on picking stocks entirely.
i have a degree in economics. stocks rarely move as intended due to economic factors. typically macroeconomics factor into price action on a longer term scale. it might make data reading a little easier to understand but stocks move on their own with no regard to economic readings
The market can stay irrational longer than I can stay liquid… I’d assume most of the people who under economics are more on the buffet side of buy and hold than on options plays… Compound interest is a helluva drug.
There are smart, informed decisions, and successful decisions. Well.. or people for that matter. They do not necessarily have to be the same. And especially when speculating, it is often better to do dumb stuff early enough. Because most players in the markets also lack information, draw the wrong conclusions, or are blinded by greed. A lot of what they invest in might, in the long run, crash. But until then it will yield a shitload of profit. Sub-Prime, Tesla, the 5387th cryptocoin...
My humble opinion is short term options trading is completely dependent on public and investor hysteria. Everything else? Just buy whatever company makes desirable products
No. As a holder of an economics degree (though I didn’t study it for any of the reasons you listed), I don’t think my knowledge in economics helped me at all in stock trading. I bought a crap ton of NVDA stocks a while ago, because I work in research, and many research in our field use softwares that only run on NVDA chips. That was a biased view of mine and making money from it was a pure coincidence. My Econ degree did help me understand real estate market and led me to stock trading for what it’s worth. And I do like to keep up with popular company news or economic news, because I want to live up more to my degree.
To a limited degree, for a certain time period. However, no one beats the market over long term.
It depends on the level of understanding. An all knowing godlike figure yes. A person with a bachelor's is probably going to "over fit the curve" and think they understand something when they really don't and lose money. Then they get frustrated and post memes here
I haven't seen any billionaire economist. The last time they tried, they spectacularly crashed the fund, and almost brought down the whole financial systems with them (LTCM). Ironically, LT stood for long-term lol.
This is a bot post I would bet money on it. No way that wasn’t written by gpt
I'm studying MSc. Economics and from my experience, it does help in longterm investing and positional trading like the government publishes the unemployment rate and interest rate, etc affects the business and people spending power stocks related to it. It's not just studying but analysing the real world (macroeconomics and geopolitics) also. If you want me to go deep, i can go on and on and on. A latest example for macroeconomics is increasing debt of US and how government is delaying it (till elections) by printing more and more money causing the stock market and overall inflation high. See the gold reserves of all countries, they are buying more gold because they know US economy is going to go down and they are protecting themselves. https://youtu.be/lyqy5VdweDM?si=jKIc47MWN0OiL0Qe I have examples of geopolitics too but it will be too long
Econ major checking in. Tend to overestimate your knowledge and under perform regards
Speaking from personal experience, yes absolutely. Some decisions my finance major friends make and their justifications are ass backwards to me. But that's because *economics* can be ass backwards to STEM oriented minds. I'm up 20% on my gambling investment account lifetime and it just seems "easy." My Roth is only 10% and uses the ETF buy and hold strategy. My gambling account is buy and hold as well, but through individual stock picks. When speaking with friends, they analyze decisions completely differently than me. I use principles and market analysis and they try showing me technical things such as 52 week trends and daily volume. Overthinking it comes to mind. Why aren't we looking at earnings reports and competition in the market sector? Growth of the company etc etc.
Economists that are good at what they do inevitably end up managing money and they stop being talking head style economists. That’s the long and short of it. If you’re even 1% better at making predictions than the market, you can make a much better and scalable living in the market.
The dumber you are in the stock market, the more money you will make. An economic degree trends towards macro bearish. I.e. the more you know, the more you will take yourself out of an investment.
Bond markets, this is more likely to be true. Stock markets, just look at how many analysts get their price targets right.
My brother is an economist and has amassed a net worth around $2 mil by being a diligent buy and hold index investor. He truly believes that over time markets are pretty efficient and that his best bet is to tune out and let them do their thing. I studied economics but was drawn to entrepreneurship. My firsthand experience is that many people make irrational decisions much of the time. I’ve amassed a net worth many times larger than my brother’s. But I’ve had big swings in net worth in my younger years. But in recent years those swings have subsided. For instance, in 2022 my net worth increased whereas many people lost money. Long story short, knowing some economics is very helpful. Adherent to it religiously won’t necessarily help you achieve outsized returns if that’s your goal.
To be honest, people who try to swing trade based on economics tend to do regarded things because they outsmart themselves. At the end of the day, it’s just a fancy way to underperform.
I justify my doordash/ubereats addiction with the concept of opportunity cost 🫠
What’s an economics
Ofcourse not. Economists are wrong all the time.