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What does neurolinguistics have to do with investments? April 22, 2008

Posted by shaferfinancial in Uncategorized.
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The field of neurolinguistics has an interesting argument going on.  The evidence seems to be gathering that language is mediating the way we can think about the world.  We need to be able to have the language to form the categories before we can perform some basic analysis.  So what does this mean to the investment world?  Well, the vast majority of folks out there have not developed the language of investments.  Without this language people are unable to make rational judgements.  This is why we see the “lemming effect.”  In short, people follow the herd because they are making decisions based on emotions because they don’t have the language to enable them to perform basic rational analysis.  Every body is getting rich buying tech stocks we think, so we go out and buy them too.  Same with real estate.  Now, real estate is spiraling down so we don’t buy.  In the stock world this is a well known phenomenon.  We have known for years that the mass of people do the exact opposite of what successful folks do (See Warren Buffett), therefore cutting their rate of return significantly.  Real estate, because it is not easy to buy and sell, has been somewhat protected from this phenomenon until recently.  But the broad point is that you need to acquire the language of finance before you decide to become an investor, any kind of investor.

The Shafer Wealth Academy (www.shaferwealthacademy.com) remains dedicated to teaching people this language as a precurser to building wealth.  Once you have the language, then you can perform the analysis to make rational decisions. Without it, you are left to your emotions and those who would manipulate them.

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