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Originally Posted by aberkok
Just to be clear, nobody thinks that the function of Economics is to predict the market, do they?
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It's not just about predicting the market, though they do try that. Economists look at a number of factors, which may or may not explain what's happening in markets. Also, there is more than one measure of the market: S&P 500, NASDAQ, Dow Jones, etc. Each one is a different measure. But what economists concern themselves with are economic indicators: GDP, employment rate, inflation rate, interest rates, housing starts, inventory levels, wage levels, labour pool levels, the consumer price index, etc. Basically they analyze and predict where we are in the business cycle. Though that's fairly difficult as well. What the Dow Jones did in a day is just a slice of what economists are concerned with.
Investors, on the other hand, would sell their souls to be able to predict the market. Some do with relative success, but are also miserably wrong at times. Some are speculators, others are value investors. Either way, the market will always humble you eventually. It's not an exact science, there isn't just one way to do it, and if someone tries to pass themselves off as a hotshot, don't give them your money.
Both economists and investors find themselves in the wrong. The case with economists is that they can usually predict things within a small degree of error. It's only when there's extreme and unusual outside factors that they get blindsided (read: 2008). But they try to learn and not make the same mistakes more than once.
Investors, on the other hand, they tend to be cyclical with their mistakes. Greed and fear override reason. Except for the good ones, of course.
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Turning 30 and being a musician was a big wake up call to start learning about this stuff, and the best thing I've found to give myself a fighting chance is NPR's Planet Money. Bit by bit I'm getting a sense of economics and finance. All kept in terms the layperson can understand.
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Economics (macro/micro) and personal finance are two entirely different subjects. No matter how connected they are.
Watching economic news while leafing through your portfolio is usually a bad idea.