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You could be the moron of the market: what is the “bigger stupid theory” that is a clear indicator of capitalism’s brutality?

While many things have changed from past to present, folks desire to be rich it hasn’t changed at all. Centuries ago, we see that people lived their lives with the aim of making more money, sometimes by establishing a company, sometimes by investing in various assets. Of course, because every game has a winner. there is also a loser. In other words, not all these people who left with the desire to get rich and make various investments are successful in this journey.

Burton Malkiel brought forward by to the theory of the greater fool These unfortunate individuals who go bankrupt as a result of their investments are called “bigger idiots” according to the newspapers. In this context, although the stock market theory in question will be explained, the bigger idiot theory is not only for financial markets, but also for making money from them. for any situation where a financial exchange takes place can be treated.

The theory is that when people buy an asset for investment purposes, they aim to sell it at a higher price.

bigger crazy

When people make investment decisions not behave rationally It is a scientifically proven fact.

From this point of view, investors try to make money by trying to sell them at a higher price than they bought, not by focusing on their true value when they invest in assets, that is, they speculate, especially in financial markets . a common phenomenon appears as.

This is precisely the logic underlying this situation, put forward by Burton Malkiel. bigger fool theory explained with.

Every investor tries to find someone willing to pay more than himself, a bigger idiot than himself!

Illustration: Hemanth

To give an example in the financial markets, an investor buys a share for 10 TL with the aim of selling it for 13 TL in the future. That is, this investor buys the shares from himself. higher price he intends to sell it to someone who agrees to pay, in other words, to an idiot taller than himself.

What about the person buying the shares for 13 TL? The same goes for him. Again, this investor intends to sell the stock he bought for 15 TL. a bigger fool waiting to buy the stock.

In other words, the one who buys a stock at the lowest price and the highest price willing to pay more He will be after that person.

But is it always possible to find a bigger idiot?

wolf of Wall Street

The fact that the investors can sell the stock they bought by finding bigger idiots than themselves for a period of time is a sign in the market that the stock in question will rise. wave of optimism if that is possible.

In simpler terms, as investors if they think they will rise Whatever the price, they will buy it. But what if the market is now negative?

Then the nightmare of all investors begins and panic reigns in the markets.

stock exchange

people who own shares “biggest idiot” they try to sell the stock by looking for bigger idiots not to be.

As we said before, every game has one There is both a loser and a winner. and while some investors profit from this game, some investors become the losers of this game. Those losers are called bigger idiots.

Source: Web Tekno



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