CC#006 - Are you a smart or dumb money investor?

Surprise! You're both.

Within any market, at any one point, there are generally two types of investors: ‘smart money’ and ‘dumb money’.

Which are you?

Well, you are neither and both. Let me explain…

An individual investor is neither smart nor dumb 100% of the time; being smart or dumb should be viewed as a continuum.

The smartest investor can become a dumb money investor via ignorance, lack of due diligence, poor sleep, challenging personal circumstances, lack of critical thinking, impatience, fear or greed.

Not only does a smart money investor have to fight to stay smart, but a dumb money investor is also tempted to think they are smart money when they are not.

This is especially the case during dramatic price rises, usually when dumb money investors shout the loudest.

During these conditions, dumb money will usually outperform smart money - on paper - for a short time, only to dramatically (and quietly) implode when the market conditions become more subdued or loss-making.