• November 29, 2019

The Investing Lessons to Learn from in “The Big Short”

Like it or loathe it, the movie, “The Big Short,” is an excellent learning tool for people who want to know more about investing. As well as delving into the murky water of Wall Street and the people in charge, it also offers a glimpse into the mind of successful investors. Most people can’t pick the brains of Michael Berry, so the next best thing is to watch them in action portrayed on the big screen.

So, with that in mind, here are the investing lessons you can take from the film and use in real-time to be successful.

You Can Short Anything

The protagonists in the movie short the housing market and win. As well as being a sad indictment of consumerism, it’s also evidence that you can short anything. Today, there are guides on everything from how to short Bitcoin and cryptocurrencies to regular stocks. Why is this a crucial lesson? It’s because businesses and entrepreneurs get lost in the stigma that there is only one way to do something. Proving that you can short anything, including mortgage bonds, provides investors with an extra weapon in their armory to make money on the stock market.

Bold Decisions Are Necessary with the Right Data

While all the major players use various data, including their gut, the overriding decisions are made with precise information. Yes, you can argue that your stomach is a piece of data, too, as it’s your subconscious sending out a warning, but it’s by no means the most significant info. Instead, like the characters in the film, you should antagonize over the stats and find patterns within the numbers to help guide you. Making decisions that go against the grain is tough; however, locating an anomaly is a sign that you’re ahead of the curve. Believe in Big Data, people!

Emotions Can Take Over

By the end of the movie, Steve Carrell’s character loses money because he can’t separate his emotions from the investment process. And, although he has to deal with some big issues, it’s still important to remember that your feelings can cloud your thinking. It might be as simple as wanting a bigger return on investment or proving a point to a rival, yet it happens. As soon as your judgment is compromised, the chances of making informed decisions are low and you could ruin your entire portfolio. Try and be clinical regarding business decisions.

Anything Is Possible

Investing is a fantastic way to increase your earnings and make more money. However, you need to speculate to accumulate, and that means there is no such thing as a surefire investment. No one would ever imagine the housing market would crash and cause a global recession, yet it did and left thousands homeless. Therefore, you should keep in mind that there is a risk involved, even if you think it’s a calculated one. Doing that will (hopefully) encourage you to be sensible and have a backup plan.

Do you have any investment rules? Share them with us in the comment section!