Posts filed under “Investing”

Thinking Outside the Game

“Men in the game are blind to what men looking on see clearly.” ~ Chinese Proverb

In the game of investing, the players are often the ones who are unknowingly being played…

The phrase, caught up in the game, can be attributed to “blind ambition” and the emotional trappings that accompany the desire to win. While there is nothing wrong with ambition, we increase the odds of losing when it obstructs our view of the objective.

For example, I do not believe investors, home-buyers, hedge fund managers, or the CEO’s of financial services firms wanted to be burned by the financial crisis of 2008. However, I do believe that most of the fore-mentioned players found themselves unknowingly on a certain path to defeat.

The beauty of financial markets and the game of investing is that you may choose your level of participation, your point of entry, and the timing of your exit. But what most players in the game fail to recognize is the greatest control variable: Players may also choose their opponents. However, the choice must be conscious to be productive.

  • Choose your opponent wisely: Put simply, one may never “lose” the game if the opponent is chosen wisely and consciously—and that opponent is you. Legendary investor, Ben Graham, once said “The investor’s chief problem—and even his worst enemy—is likely to be himself.” Once you recognize yourself as the opponent, all that remains is the awareness of your own ignorance, the greatest source of weakness. With self-awareness, you may observe the game even as you play it and, thus you may become a better investor.
  • Play for the game, not the win: A problem with the human brain is that it is not wired for financial success. It is reward-centered; it seeks the end and fails to appreciate or even recognize the means; it is the rat seeking the block of cheese. But unlike our furry little friends, we humans refuse to follow the maze to reach our reward. We want shortcuts to “beat the market,” which becomes the reward of the self-defeating rat brain. Ironically it is the desire for this reward that often inhibits one’s ability to reach it.
  • Turn down the noise:  The reward (and supposed shortcuts to it) are communicated through financial media. Again, it is self-awareness that can prevent us from becoming our own enemy but it also enables the recognition of our external adversaries, which are our sources of information. Ask a few reflective questions: Where do most of your investing ideas come from? Do you find your information or does it find you? Do your sources of information exist to sell advertising? Do they appear to thrive on inciting emotion or do they present information in a factual and unbiased manner? If it is raw data that you need to make informed investing decisions, then find sources of information that produce few emotion-provoking headlines and speculative opinions to attract page views and listeners.

When our focus is process-centered, or on “how we play the game,” then our attention to winning or losing, and the damaging emotions attached to these ends, no longer impedes our capacity to perform as players—we enable ourselves to think outside of the game.

By virtue of self-awareness and finding reward in the journey, the blindness created by the desire for the destination is removed. And we begin to see clearly…

Kent Thune is the blog author of The Financial Philosopher. You can follow Kent on Twitter @ThinkersQuill.

Category: Investing, Philosophy

Paul Tudor Jones: 13 Insights

I love this collection of Paul Tudor Jones insights and rules by way of Ivanhoff Capital:   13 Insights From Paul Tudor Jones 1. Markets have consistently experienced “100-year events” every five years. While I spend a significant amount of my time on analytics and collecting fundamental information, at the end of the day, I am…Read More

Category: Apprenticed Investor, Investing, Rules

Fed-Driven U.S. Stock Advance Leaves Grantham Waiting for Bubble by David Wilson (Bloomberg) — Adjusting U.S. stock-market indicators for Federal Reserve policy since the 1980s shows a bubble has yet to come, according to Jeremy Grantham, Grantham, Mayo, Van Otterloo & Co.’s chief investment strategist. The attached chart highlights one gauge, Yale University Professor Robert…Read More

Category: Data Analysis, Investing, Think Tank

The Remarkable Life and Investing Lessons of Ronald Read

The remarkable life and lessons of Ronald Read, the $8 million janitor Barry Ritholtz Washington Post, April 26 2015       You may have read about the remarkable life and times of Ronald Read. He was the gas station attendant and lifelong resident of Windham County, Vt., who had quietly accumulated a portfolio worth…Read More

Category: Apprenticed Investor, Investing

Ray Dalio’s World View

Ray Dalio’s world view

Fareed talks to Ray Dalio, founder of the largest hedge fund, about his success and his views on the global economy.

Click for the video.

Source: CNN

Category: Hedge Funds, Investing, Video

The Remarkable Life & Lessons of Ronald Read

    My Sunday Washington Post Business Section column is out. This morning, we look at the remarkable life and lessons of Ronald Read. It is a fascinating tale. Here’s an excerpt from the column: “You may have read about the remarkable life and times of Ronald Read. He was the gas station attendant and…Read More

Category: Apprenticed Investor, Investing, Psychology

The Fiduciary Standard is Coming!

In 2011, the Securities and Exchange Commission published a study, mandated by the Dodd-Frank Act, which concluded that all financial advisers and stock brokers should be placed under “a uniform fiduciary standard.” Basically this meant that brokers and advisers would have an obligation to put the interests of clients first and must disclose any conflicts of…Read More

Category: Investing, Legal, Regulation

Protect Your Assets: Common-sense Cybersecurity for Investors

Let’s get the scary stuff out of the way upfront: Cybercrime costs the global economy $575 billion annually, according to reports. The United States takes a $100 billion hit, the largest of any country, according to Politico. A report from former U.S. intelligence officials counted 40 million people whose personal information was stolen within the past year.Online theft…Read More

Category: Apprenticed Investor, Investing, Web/Tech

Druckenmiller: Look for Three Market Surprises in 2015

Stan Druckenmiller is betting on the unexpected. With one of the best long-term track records in money management, he is anticipating three surprises: Improving economy in China, Rising oil prices, and no Federal Reserve interest rate increase in 2015.

Stan Druckenmiller: Zero-Interest Rates Unnecessary

Category: Bailouts, Federal Reserve, Investing, Video

Investor Friendly Tax Policy Both Parties Can Like

It’s tax day. Perhaps like millions of your fellow Americans, you waited to the last minute to file and will be trudging off to the post office or filing electronically later today. I’m not going to lecture about your procrastination. However, I am going to ask you two somewhat tax-related questions: 1. How much have…Read More

Category: 401(k), Investing, Taxes and Policy