Intuitions and stock market investments

After the wonder octopus episode in the just concluded 2010 world cup soccer my investor friend had asked me the other day how to sniff out a good stock market investments? He also narrated to me the octopus strength of “intuitions” in stock market investments.

I was wondering is it worth a research on the role of intuitions or gut feelings in taking up either buying or selling positions in stock trading. Many theoretical essays have been published. In practice I have come across many investors and traders rely only on their gut feelings when it comes to stock market trading. In fact I spoke to, many of my investor and day trading friends and they hardly made any denial on the point.

In reality anyone knows that investing in the stock market is a complex process. It is not everyone’s cup of tea. Large range of economic, business and policy information is required to be studied in order to make what is called optimum buying or selling decisions.

You may well ask that not everyone is good in understanding and analyzing such information to their advantage. Yes, definitely I agree with the view.

On the other hand what I understand is that buying and selling stocks is all about making decisions from a range of choices. Some of them are known and many of them are unknown.

Then how can one make decisions about choosing a stock? By reading business magazines, news paper columns or watching out TV shows or enrolling you for any investor seminar. Definitely not.  Psychology of investment decision making is different ballgame.

It is very interesting to note that the psychology of decision making as observed and informed by behavioral finance  suggesting that investors do not necessarily follow a rational decision making process as stated by traditional finance theory or technical analysis. .

Many times I have observed that financial fundamentals don’t always alone judge the course of the movement of particular scrip in the market.

“When confronted with complex tasks, humans rely only on gut feelings or intuition and invoke rules of thumb that attempt to hit on the most important financial information to make investment decisions – and ignore the rest.”  It is correct and true in practice.

When, it comes to stock market investments, I have seen and told by many of my friends that the rules of thump followed mostly in the markets are one’s gut feeling decisions about either moves in buying or selling or booking profits or losses.

I also read somewhere that” Wall Street people learn nothing and forget everything”.

“There are no rules about investment. Sharks can be good. Artist’s dung can be good. Oil on canvas can be good”.

Does any investor disagree with the view that partial ignorance, rather than extensive knowledge paid rich dividends?

Therefore my piece of experience recommends don’t look forward any SMS tips and browse internet sites for investment suggestions.

What I have experienced is to invest and survive variety of market risks bubbles one should be-Wiser-Speculative and street smart!!

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