Aswath Damodaran: The Biggest Mistake Investors Make

Johnny HopkinsAswath DamodaranLeave a Comment

During his recent interview at the SKAGEN Funds New Years Conference 2023, Aswath Damodaran discussed the biggest mistake that investors make. Here’s an excerpt from the interview:

I think most investors are traders, not traitors, but traders.

In other words the essence of trading is you buy low, you sell high, you play games with pricing metrics, you look at technical analysis, and there’s nothing wrong with it.

The biggest mistake that people make is when they are delusional traders who think… who act like they’re investors.

So when I see an analyst get on CNBC, and I know the analyst is a momentum trader, basically they pick stocks that have gone up the most, put buy recommendations on them, and talk about fundamentals. My response is stop being delusional.

If you’re a trader talk about things that drive trading. If you’re an investor focus on investing. Don’t talk to me about what the market is doing and pricing factors, talk about the fundamentals of the company.

So I think the biggest mistake we make is we delude ourselves into believing we’re something we’re not. Investors who act like traders, and traders who act like investors.

You can watch the entire discussion here:

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