Robert Shiller, a professor of economics at Yale University, shares advice about investing he learned in graduate school.

One needs to think antisocially to excel in investing, to resist the patterns of thinking that seem mysteriously to arrive simultaneously in the minds of millions of people around the world. People do not trust their own judgment but go along with the crowd, even when they can see truth.

It’s tough to take a contrary view point. First, it’s easy to believe that “a million people can’t be wrong.” The “wisdom” of crowds may be valid for some things, but usually not investing decisions. When the rest of the world is selling, it is probably a good time to buy. And vice versa.

Second, the media make it easy to get confused. mass market hype will trend in one direction, while a bevvy of financial reporters in a small segment of the media will unanimously vote in the opposite direction. Which trend should you buck?

The smartest advice I ever got, CNN Money, July 22, 2008

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