Advertisement
Investor Psychology

The Cramer Effect

In the year I’ve been writing this column, one name comes up again and again when I interview experts on investor psychology: Jim Cramer, the host of CNBC’s Mad Money. They cite him as the guy most likely to push our emotional buttons and spur us to make impulsive investment decisions.

In the year I’ve been writing this column, one name comes up again and again when I interview experts on investor psychology: Jim Cramer, the host of CNBC’s Mad Money. They cite him as the guy most likely to push our emotional buttons and spur us to make impulsive investment decisions. Below is a list of triggers to watch out for -- in Mad Money and the investing world in general.

Ticker overload

Ticker streams are mainly babble. But our brains are wired to see patterns in random data, so they appear meaningful. Plus, the ticker’s speed whips up our enthusiasm, much like the whirling wheels on a slot machine.

Bright lights, big noises

Casinos have long known that sounds and flashing lights generateexcitement and spur people to act impulsively. Investment decisions are best made logically, not emotionally.

Shoot from the hip!

Cramer’s stock picks focus on recent events, and the recency effect—putting too much importance on the near term—blinds us to crucial long-term trends.

It’s all about Jim

With no one on the set to challenge him, Cramer becomes an undisputed authority figure. Authority figures hold undue sway over our opinions.

He talks reallyreallyfast

Cramer is a fast talker, and research has shown that a fast-talking broker is more successful at persuading people to invest than a broker who speaks at a slower pace.

Overconfidence man

Despite a track record that studies have found to be merely average, Cramer exudes unabashed confidence. That in turn can make viewers over­confident—and overconfidence is perhaps the number-one cause of poor investment decisions.

There’s a reason it drives bulls crazy

The motif of Cramer’s set features the color red, an intense and sometimes angry hue that is known for creating feelings of excitement or agitation.

Advertisement

Most Popular

What Are the Income Tax Brackets for 2020 vs. 2019?
tax brackets

What Are the Income Tax Brackets for 2020 vs. 2019?

The IRS unveiled the 2020 tax brackets, and it's never too early to start planning to minimize your future tax bill.
June 20, 2020
Tax Changes and Key Amounts for the 2020 Tax Year
tax law

Tax Changes and Key Amounts for the 2020 Tax Year

Americans are facing a long list of tax changes for the 2020 tax year...and it's never too early to start thinking about next year's return.
June 22, 2020
Find a Great Place to Retire
happy retirement

Find a Great Place to Retire

Our cities provide plenty of space to spread out without skimping on health care or other amenities.
July 2, 2020

Recommended

65 Best Dividend Stocks You Can Count On
stocks

65 Best Dividend Stocks You Can Count On

These 65 Dividend Aristocrats are an elite group of dividend stocks that have reliably increased their annual payouts every year for at least a quarte…
July 8, 2020
13 Best Vanguard Funds for the Next Bull Market
mutual funds

13 Best Vanguard Funds for the Next Bull Market

Optimistic that the bounce since March is indeed the start of the next bull market? Here are the 13 best Vanguard funds to help you make the most of i…
July 7, 2020
3 Municipal Bond Funds for Rich, Tax-Friendly Yields
Investing for Income

3 Municipal Bond Funds for Rich, Tax-Friendly Yields

Municipal bond funds allow you to enjoy the benefits of tax-exempt income. By investing CEFs, you can sweeten the pot even further.
July 2, 2020
Is the Stock Market Closed for the Fourth of July?
Markets

Is the Stock Market Closed for the Fourth of July?

Independence Day falls on a Saturday in 2020. As a result, the bond and stock markets are closed for a long holiday weekend. Here's a look at the mark…
July 2, 2020