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Seven Sins of Fund Management

Posted By Barry Ritholtz On February 12, 2006 @ 7:12 am In Investing,Psychology | Comments Disabled

There is a terrific PDF (warning — its 105 pages) on the Seven Sins of Fund Management [1]. It is a behavioural critique by James Montier, the Global Equity Strategist of Dresdner Kleinwort Wasserstein, and its full of all sorts of smart observations, backed up with data and charts.

I haven’t read prior work of Mr. Montier — but this PDF made me interested in his book, "Behavioural Finance: A User’s Guide [2]."

I may be  referencing parts of the PDF in the future, but if you want an overview, here are the 7 Deadly Sins

Sin 1 Forecasting
The folly of forecasting: Ignore all economists, strategists & analysts
Do analysts understand value: who is the greater fool?

Sin 2 The illusion of knowledge
The illusion of knowledge, or is more information better information?

Sin 3 Meeting companies
Why waste your time listening to company management?

Sin 4 Thinking you can out-smart everyone else
Who’s a pretty boy then? Or beauty contests, rationality and great fools

Sin 5 Short time horizons and overtrading
ADHD, time horizons and underperformance

Sin 6 Believing everything you read
The story is the thing, or the allure of growth
Scepticism is rare, or, Descartes vs. Spinoza

Sin 7 Group decisions
Are two heads better than one?



Seven Sins of Fund Management [1]
James Montier
Dresdner Kleinwort Wasserstein, November 2005


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URLs in this post:

[1] Seven Sins of Fund Management: http://www.trendfollowing.com/whitepaper/Seven_Sins_o-DrKW-100436-N.pdf

[2] Behavioural Finance: A User’s Guide: http://www.amazon.com/exec/obidos/ASIN/0470844876/thebigpictu09-20/102-1793806-1323309

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