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Here’s an interesting psychology experiment that could make (or lose) you a lot of money.

Two versions of a New York Times book review were shown to different focus groups.

One group was shown a positive review of the book while the other was shown a negative review of the same book.

The only difference between the two book reviews was the positive words in one review were substituted for more critical words (on the same reading level) in the negative review.

Here’s the positive review of the book:

In 128 inspired pages, Alvin Harter, with his first work of fiction, shows himself to be an extremely capable young American author. A Longer Dawn is a novella - a prose poem, if you will— of tremendous impact. It deals with elemental things: life, love, and death, and does so with such great intensity that it achieves new heights of superior writing on every page.

And here’s the negative review:

In 128 uninspired pages, Alvin Harter, with his first work of fiction, shows himself to be an extremely incapable young American author. A Longer Dawn is a novella - a prose poem, if you will— of negligible impact. It deals with elemental things: life, love, and death, and does so with such little intensity that it achieves new depths of inferior writing on every page.

As you can see, the reviews are identical except for a few words.

“Inspired” was changed to “uninspired.” “Capable” was changed to “incapable.” “Great intensity” to “little intensity,” etc.

What’s interesting about the results of this study is the focus groups deemed the negative reviewer 14% more intelligent while having 16% greater literary expertise than the positive reviewer.

Going further, researchers also found that the negative reviewer was deemed more experienced and trustworthy, while the positive reviewer was seen as more naive.

“People think an amateur can appreciate art, but it takes a professor to critique it,” might be a good phrase to sum up this study.

I bring this to your attention because there is plenty of negative sentiment being expressed about today’s stock market – which according to this study you might be more inclined to believe.

You can’t turn on CNBC, Bloomberg, or Fox Business without hearing fear-mongers.

They warn about recessions, skyrocketing interest rates, or a complete market collapse.

It’s enough to make any investor question their decisions. After all, according to the psychology experiment, we’re wired to place more credibility on criticism than praise.

But let me offer a counterpoint.

Warren Buffett famously said, “Be fearful when others are greedy, and greedy when others are fearful.”

This isn’t just a catchy quote. It’s a roadmap for navigating markets clouded by negativity.

The truth is that negativity in the stock market often reflects fear rather than facts.

Historically, downturns and corrections have been buying opportunities, not warnings to flee.

The stock market has weathered countless crises – wars, financial crises, pandemics, and political turmoil, just to name some recents – yet it’s consistently climbed over the long-term.

So when you hear warnings of an impending crash or “experts” saying the stock market is doomed, ask yourself: Is this skepticism rooted in facts or simply the natural human bias toward negativity?

In the end, perspective is everything.

As this psychology experiment shows, we might instinctively respect the critics, but it’s the optimists who often come out ahead.