The art of successful investing is to act contrary to the crowd. That was the theory of one Fred C. Kelly back in 1930.
In Why You Win or Lose: The Psychology of Speculation, Kelly wrote about his experiences with the market and the timeless lesson he learned:
I learned that men win or lose not so much because of economic conditions as because of human psychology. Certain mental traits that we nearly all have are barriers to success.
Therein lies the crux of Kelly’s theory. If most market participants behave normally, and normal behavior typically leads to mistakes, then the answer is to not act normal. Continue Reading…