Why You Win or Lose by Fred C. Kelly

Author:Fred C. Kelly
Language: eng
Format: epub
ISBN: 9780486147840
Publisher: Dover Publications
Published: 2012-10-08T16:00:00+00:00

CHAPTER VII

WIN BY BEING CONTRARY!

Since, as we have seen, the natural behavior of the average person is likely to be wrong, and powerful interests are constantly at work to lure one into acting unwisely, what is one to do?

Fortunately, as already suggested, there is one fairly safe guide to prudent procedure—to do exactly the opposite from what the majority of other people are doing. If one would win he must be contrary.

Most people buy the wrong stocks, at the wrong time, sell at the wrong time and then pay the broker a handsome fee for executing these misguided orders.

Every successful speculator knows, and every keen student of human psychology knows, that the mass of people are overwhelmingly less intelligent than the few. All scientific intelligence tests, in the army, in schools and colleges, everywhere, indicate that about two per cent of all the people in any community are more capable of reaching logical conclusions than are the other 98 per cent. One may easily prove this simply by checking over his own list of acquaintances. You probably know at least one hundred persons fairly well. You may know several hundred; but of this list, you naturally know one hundred better than the others. Now, of this one hundred intimate friends, neighbors and other acquaintances, aren’t there two or three who have far more sense, whose judgment on almost anything you would rather trust, than all the rest put together? It is probably safe to say that Henry Ford’s judgment about the automobile business is usually more worth having than the composite opinion of all his thousands of employees. No matter how many people you start running around a race track, they can’t overtake a champion, can they?

Surely it is reasonable to assume that the stock market has lured in a fairly representative cross-section of the public and that, therefore, if the majority of all people are less capable than the few of deciding anything sensibly, this must hold true likewise of their behavior in stocks. Indeed, it is even more true of people in the market, because of highly and skillfully organized plans to lead them astray. The game is always rigged by the smart to outwit the stupid.

To succeed in the market, then, one must not do what most others are doing. Hence it is dangerous to pay the slightest heed to what you most often hear or see—vox populi, vox Dei, regardless. But since most people are fairly sure to be wrong, he who does the opposite has a good chance to be right. We may not know what the highly intelligent minority are doing, but by watching and studying the crowd, we can pick up useful clues as to what that same minority are not doing. In other words, those of us who are only moderately intelligent and might not behave wisely by independent effort always have the opportunity to join up with smart folk if we’ll just consistently pay no attention to all the signs which

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