Chart of the S&P 500 index, showing the weekly closing prices, going back one year.
Myopic Loss Aversion: What It Is And How To Avoid It In this series of articles I explore behavioral influences on investor decision-making and the effects certain behaviors have on investment success. By studying the behavior of hundreds of investors over the past 30 years, I have come to the conclusion that most investors, regardless […]
Don’t Be The Greater Fool One of my favorite TV shows right now is HBO’s The Newsroom. The guy who writes the show, Aaron Sorkin, is known for fast-paced, snappy dialog. In the final episode of season 1, economics reporter Sloan Sabbith (played by the lovely and talented Olivia Munn) tells her boss, anchorman Will McAvoy […]
Here’s a Pop Quiz to determine how much you know about investing, and how prepared you are to do battle with the Big Boys. If you’re interested in finding out the truth, then take the test without Googling or Wiki-ing the answers. Send your answers to firstname.lastname@example.org to find out your score. Your answers will be […]
When you first start to study a field, it seems like you have to memorize millions of facts, figures, and rules. You don’t. What you need is to identify the core principles — generally three to twelve of them — that govern the field. The million things you thought you had to memorize are simply […]
Be honest. Have you ever purchased a mutual fund based on a glowing report that you read in a glossy magazine? Or a respected publication like Morningstar or Barron’s? Did the mutual fund’s track record impress you so much that you couldn’t resist the urge to get in on the action? Welcome to the club. […]
One of the character traits that is shared by many high-achieving investors is self-awareness. Knowing who you are – your preferences, tendencies, biases, and beliefs – gives investors who possess this skill a noticeable advantage over those who are less self-aware. For example, if I know that I have a tendency to sell a winning […]
The following article first appeared on the cultural blog 99U.com. It contains some great insights that can be useful for investors as they struggle with tough decisions. In an interview last year, I asked acclaimed graphic designer James Victore what made him so efficient. His simple reply: “I make decisions.” We make hundreds, if not […]
The most striking finding in behavioral finance is how astonishingly overconfident most investors are. This would be trivial if they were playing Monopoly, but becomes tragic when investors play with real money and their futures hang in the balance. Extreme, soul-chastening circumspection is called for on one point in particular, the one question you must ask […]
The traditional model for financial advice giving is flawed. Advisers don’t have enough time to give their undivided attention to every client. If you’re paying a fee that’s based on the size of your account, consider switching to an hourly-fee model where you only pay for the time you actually get.