Behavioral Finance
An Investment Framework Forces Discipline
The father of value investing, Benjamin Graham, said, “The investor’s chief problem—and even his worst enemy—is likely to be himself.” In this post, we’ll cover five common biases and how you can deal with them.
Read MoreThe S&P 500 Will Gain 20% This Year | Recency Bias
“The S&P 500 will gain 20% in the first year of the new Millennium!” said the yuppie analyst to an impressed journalist while sipping champagne and chewing on a lobster tail. How could this, obviously well-paid, lobster-eating yuppie analyst be so wrong?
Read MoreYou Say Valeant Pharmaceuticals Share Is Still Worth US$200? | Anchoring
What would be the reason for someone to think that a Valeant Pharmaceuticals share is still worth US$200? There may be many reasons for sure, but one of them is bound to be that the investor first bought the share at US$200 and, therefore, has anchored themselves to that price as the share’s value.
Read MoreThe Illusion of Overconfidence | Overconfidence
Have you ever met that guy who always has the answer for everything and is certain about being right? Did you know that 93% of Americans are above-average drivers? Either way, you should read this post.
Read MoreWarren Buffett Knows How to Deal with Painful Losses | Loss Aversion
Remember that stock which you bought that went down by 30%, and you didn’t sell? If you are absolutely convinced that a stock will do well, but then the price falls by 30%, it’s easy to think: “It’s on sale! I’ll invest more” to avoid or delay the loss.
Read MoreEnron Was a Truly Great Company, I’ll Block You on Facebook if You Disagree | Confirmation Bias
When you have your mind set on something, do you evade criticism? Then you should read this post and learn how to deal with confirmation bias!
Read MoreYou Probably Didn’t Know It All Along | Hindsight Bias
Have you ever met someone who stated, “I knew it all along”? Maybe someone who claimed to have known the crash was coming when the financial crisis in 2008 hit its worst. Then you should read this post!
Read MoreWhat Type of Investor Are You? Active, Passive or DIY Investing?
You are your own worst enemy when it comes to investing. You can either decide to let someone else do it for you or create a solid investment framework to improve your chances of investment success.
Read MoreDoes More Information = More Money?
Information is a central concept in investing. It’s central in the sense that an investor’s informational advantage can be the sole reason he or she makes money in the market, and might even be able to do so continuously. But does more information always equal to more money when investing in stocks?
Read MoreHow Rational is the Market?
In this post we’ll focus on OUR aggregate rationality, i.e. the aggregate rationality of many individuals, or to word it easier; the market. You’ll discover how we are much smarter together rather than alone. And even though I believe that is true, I will let you know why I don’t think that is the case for stock markets, and why the market is more like a beauty contest.
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