What is the Consumer Price Index (CPI)?

What is the Consumer Price Index(CPI)? The Consumer Price Index (CPI) is a measure of the change in prices paid by consumers for a basket of goods and services. It is one of the most widely followed economic indicators, and it is used by investors to gauge inflation and make investment decisions. How is the CPI calculated? The CPI is calculated by the Bureau of Labor Statistics (BLS). The BLS surveys households across the United States to collect data on the prices they pay for goods and services. This data is then used to create a "basket" of goods and services that represents the spending habits of the average American household. The BLS calculates the CPI by comparing the prices in the basket of goods and services in a given month to the prices in the same basket of goods and services in a base year. The base year is usually 2000. How does the CPI affect investing? The CPI is an important indicator of inflation. When the CPI rises, it means that the cost of living is incre

The importance of "humility" in stock trading

It's easy to fall into the trap of thinking that investing in stocks is like a goose that lays golden eggs, especially in a bull market. However, it's important to keep your emotions under control and always maintain an attitude of "humility" in such situations.

The importance of humility in stock trading

Bankruptcy due to hubris

When your investments are performing well, it's easy to think, "I'm an investment god." However, hubris can lead to investment failure. In 1995, the 230-year-old Barings bank in the United Kingdom collapsed. One investor, Nick Leeson, was so overconfident in his ability to invest that he led the bank into bankruptcy. This example shows how complacency in investing can have devastating consequences.


The trap of the winning streak

During a sustained bull market, when returns are high, investors can be tricked into thinking they have the hand of Midas. This can lead to overconfidence in their investment performance. This overconfidence can lead them to take bigger risks, which in turn can lead to big losses. Therefore, it is important for investors to always keep their emotions under control and not get overconfident.


Humility, the key to investing

The most important thing in investing is to be humble. Success in investing is given by the market, not by the investor's own abilities. Therefore, investors should always maintain a humble attitude, even if the returns are high. This is one of the ways to protect yourself from failure in investing.


Conclusion

Investing in stocks offers attractive returns, but it always comes with risks. It's important for investors to keep their emotions under control and not get overconfident. Also, it's important to always remain humble, as success in investing is given by the market and not by your own abilities. Only in this way will investors be able to consistently earn profits.