The Behavioral Investor

The gentleman, after a brief thanks for the presentation, asked for my opinion of Apple stock as it made up a large portion of his $2 million portfolio. Now, I held the stock in my separate account strategies at the time and it was the highest rated stock in my investable universe at that very moment; I could not have been more bullish on Apple. Bu

The discussion of luck versus skill in investment management goes far beyond theoreticals and should directly inform the way that behavioral investors structure their portfolios. Understanding that markets are part luck and part skill informs us that we should emphasize rules over practice and that we should hold portfolios that are diverse enough

“We create our fate every day… most of the ills we suffer from are directly traceable to our own behavior.” — Henry Miller

we will take the four pillars of behavioral risk management identified in Part Two and speak to the particulars of what they mean in the context of managing money. By way of quick reminder, they are: Ego – tendency toward overconfidence and behaving in ways that maintain feelings of personal competency over clear-eyed decision-making. Conservatism

The problem with the levees was one that is often observed in finance: they were designed to manage the greatest storm that had ever been and not the greatest storm that could ever be.

You’ve likely heard of a straw man argument in which a weakened caricature of an opposing opinion is presented, only to be dismantled. A less discussed but more effective critical thinking technique is to create a steel man, which represents the very best thinking and most rigorous empirical proof of an opinion with which you disagree. Rather than

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

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

The very process of trying to define a gold standard can result in its bastardization. It has been said that “what gets measured gets done,” but it is equally true that “what gets measured gets dumb.”