The trap of the prophets of doom

The role of the prophets of doom

Prophets of doom are omnipresent on the financial markets and are perceived with a mixture of skepticism and fascination. They come to the fore particularly when markets are unstable or major economic changes are imminent. These personalities, often self-proclaimed experts or sometimes even renowned economic analysts, claim to predict inevitable market collapses and economic disasters.

Psychological attraction

The messages of the prophets of doom have a strong psychological appeal. They play on natural human fears, especially in times of economic uncertainty. These fears can lead to irrational decisions, such as rushing to sell shares or withdrawing from the market at times when stability and long-term thinking are required.

Historical examples and reality check

Historically, there have always been prophets of doom who have predicted major market collapses – usually with spectacular miscalculations. While some of their predictions happened to be correct, their overall accuracy rate is no higher than that of random predictions. This is a clear indication that their predictions are often vague guesses rather than based on solid analysis.

Media influence and sensationalism

In today’s highly connected world, the media plays a crucial role in spreading the messages of prophets of doom. Sensational headlines about impending market crises attract attention and are often disseminated uncritically without questioning the credibility or track record of the source. This is very dangerous and fundamentally due to the sensationalism of many readers. Without big headlines, it is almost impossible to generate attention these days.

Business models behind the predictions

It is important to recognize that prophets of doom usually pursue their own commercial interests. For example, they can profit from spreading fear by selling books, giving lectures or recommending certain financial products that would benefit from the crisis they are predicting.

Why you should ignore prophets of doom

It is crucial to understand that the stock market goes through long-term cycles that include both upswings and downswings. Historically, markets have recovered from setbacks and shown long-term growth. It is therefore important not to be influenced by short-term gloomy forecasts. Instead, focus on the key success factors when investing and turn a blind eye to the prophets of doom.

The true success factors on the stock market

1. Time perspective: Long-term thinking is crucial. An investment horizon that is too short is risky and tends to be based on luck and chance. With a long-term investment horizon, the chances of an attractive return are very good.
2. Investment strategy: A clearly defined investment strategy based on your personal goals and risk tolerance is the key to success.
3. Emotional discipline: It is important to remain calm and level-headed, even when the markets are volatile. Emotional decisions are fatal and can ruin your long-term returns.
4. Hypes & herd instinct: Resist the urge to be led by market hypes or the herd behavior of other investors, as these often lead to ill-considered decisions.
5. Diversification: Spreading your investments across different asset classes and/or sectors reduces risks and increases the chances of a positive return.
6. Currencies: An awareness of currency risks and opportunities is important, especially if you are investing globally.

Conclusion

In the world of financial investments, it is essential to make informed and considered decisions. Don’t be swayed by prophets of doom who are more likely to cause confusion than offer real advice. Instead, focus on the success factors mentioned above to achieve long-term success in the stock market. This will protect you against the emotional turmoil that can be triggered by dramatic predictions from prophets of doom.

As an independent asset manager, we are at your side. We help you navigate the world of complex and sometimes contradictory financial information. Together we will find a clear and solid way to achieve your financial goals.

Yours, Mark Stock©

Mark Stock is a member of the Point Capital editorial team. “I am a stock market enthusiast and am passionate about economic history. I have been following the ups and downs of the markets for years and, of course, invest myself – preferably in shares. So my name says it all. Every month, I take up what I consider to be an exciting topic. And since the focus is on the content and not on me personally, I write under a pseudonym.”