The Behavioral Investor

As complexity proliferates, decision-making ability disintegrates. More interesting still is that unconscious decisions seem to lead to better subjective appraisals post-choice. People tend to be happier with their choices when they don’t give them much thought.

As news outlets become more and more partisan and specialized, the value of information can become so diminished that it can actually become harmful. Those who ought to be selling signal have by and large become purveyors of noise. What’s more, the coming glut of information means that we will be compelled to rely more and more heavily on heuristic

Learning to score your investment wins and losses based on the quality of your decisions and not on the quality of the outcome is the key to managing your emotions, appropriately measuring your own performance and living to fight another day.

the human mind is a happiness preservation machine and facilitates that by remaining superficial when things are going well. Nothing kills your buzz like having to think in nuance or, in the case of an investor, read an in-depth analysis of company financials.

The fact that your brain becomes more risk seeking in bull markets and more conservative in bear markets means that you are neurologically predisposed to violate the first rule of investing, “buy low and sell high.” Our flawed brain leads us to subjectively experience low levels of risk when risk is actually quite high, a concept that Howard Marks

Taleb believed there to be an asymmetry between the size of losses and gains that might occur. Although there was a greater likelihood that the market would rise (as is almost always the case), the repercussions of a falling market, however unlikely, were much more dramatic. Thus, he operated from his best estimate of expected value and not just si

Hardcore passive management enthusiasts overemphasize the overarching pull toward efficiency and mistake the general trend for the Gospel Truth. In so doing, they overlook valuable opportunities for return enhancement that are available to behavioral investors. Advocates for traditional active management are quick to point out the behavioral anomal

At times when you feel like straying from your rules, it can be useful to consider Michele McDonald’s R.A.I.N. model, a simple but powerful system for managing an episode of acute stress. The acronym is as follows: Recognition – Deliberately observe and name what is occurring in your body and mind. For instance, “I feel my heart and mind racing.” A

If inhibiting emotion is good, is it possible that doing away with it altogether is even better? This is the line of thought pursued in a Stanford University study titled, ‘Investment Behavior and the Negative Side of Emotion’. Within, the researchers pitted 15 individuals with brain damage to their emotional processing centers against 15 “neurotyp