Category Archives for "Behavioral Finance"

The Greater Fool Theory

dilbert

One of my favorite TV shows in recent years 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 (played by Jeff Daniels): […]

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Characteristics of highly accomplished investors

skill

What do Warren Buffett, George Soros, Carl Icahn, Ray Dalio, Abigail Johnson, James Simons, Thomas Peterffy, Ron Perelman, and Steve Cohen all have in common? They are all highly accomplished investors. And they make up 9 out of the 10 richest Americans, according to Forbes, Inc. Introduction The fact that 9 out of the 10 […]

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Are You A Secret Market-Timer?

retirement fund

Here’s something that you might not know. You might be a market-timer, even though you may not be aware of it. Market-timing gets a bad rap in the investment community. Most experts say that it’s nearly impossible to improve your results by jumping into and out of the market. Sure, anyone can get lucky and […]

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What Kind of Investor Are You?

stock-market

Over the course of my 35 years as a trader, portfolio manager, and personal investing coach, I’ve worked with thousands of investors. I’ve trained them, advised them, and coached them. I’ve observed a few common traits that investors share, which allows me to categorize them into different investor types. What follows is a summary of […]

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Doing God’s Work as an Investment Advisor

camel

Investment Advisors, fearing extinction, have turned to God to defend their purpose on earth I admit it. It irks me when I hear an investment advisor try to claim the moral or ethical high ground in order to buttress his or her argument for a “beat-the-market” strategy. Even when the sales pitch is obviously wrong […]

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Let’s Be Honest About Market Predictions

money wizard

Whether you realize it or not, every investment decision you make today is based on a prediction about the future. If we reduce this idea down to its most basic form, it looks like this. When you buy a security, you are predicting that it will be worth more than you paid when you sell […]

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Smart Beta Just Got A Whole Lot Smarter

smart beta wizard

The financial alchemists at ERI Scientific Beta are offering an innovative way to charge management fees: you only pay when their product delivers on its promise. The lure of so-called smart beta funds has always been the promise, whether stated explicitly or merely implied, that the people running them have a secret formula for beating […]

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Keynesian Beauty Contest

keynesian beauty contest

The Keynesian Beauty Contest is a concept developed by John Maynard Keynes and introduced in Chapter 12 of his work, The General Theory of Employment, Interest and Money (1936), to explain price fluctuations in the stock market. How It Works Keynes described the behavior of rational stock market investors, using an analogy based on a […]

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