Posts filed under “Psychology”
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My Sunday Washington Post Business Section column is out: Missed the big market rally? Here’s what to do now.
In the office, we have been getting lots of calls from people who missed the big move off of the 2009 lows. What should they do in those circumstances?
Here’s an excerpt from the column:
“What do you do now? How to begin to repair the damage?
It is a two-part process: The initial steps are designed to help you overcome your risk aversion — the emotional aspects of investing. Call it your “erroneous behavioral economic zone.” After we fix that big underutilized brain of yours, we can move on to the investment steps that allow you to work your way back into markets.”
Some parting thoughts:
“When your investing timeline is measured in decades, you cannot afford to continually miss an ongoing rally because of day-to-day volatility.
Markets that rally 150 percent come along once a generation. If you missed this one, it is probably because you based your investing on some form of guess as to what stocks were going to do. Experience teaches us that we are all pretty bad at making forecasts nearly all of the time. This is why any prediction-based investment strategy is doomed to failure. The outcome is binary: Your guesses are either right or wrong.
Consider instead a probability-based investment approach. The idea behind asset allocation is to allow mean reversion, rebalancing and diversification to work in your favor. No guesswork required.”
Go read the whole thing here.
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Source:
Missed the big market rally? Here’s what to do now.
Barry Ritholtz
Washington Post, June 16 2013
http://www.washingtonpost.com/business/missed-the-big-market-rally-heres-what-to-do-now/2013/06/14/b9b96894-d1e3-11e2-a73e-826d299ff459_story.html
Category: Asset Allocation, Investing, Psychology
Here is my market quote for today, from MacroMan: “The Market giveth and the Market inserts red hot pokers before dicing you into small chunks and spreading your remains to the four corners of the earth.” That’s a bit more severe than “and the market taketh away,” but certainly makes a noteworthy point…Read More
Category: Philosophy, Psychology, Trading
Below is my presentation: The High Cost of Neuro-Financial Errors: How Cognitive Bias and Performance Chasing leads to Investing Failures at the Trustee Leadership Forum for Retirement Security conference at the Kennedy School, Harvard University June 10, 2013. Cambridge is simply lovely . . .
Category: Hedge Funds, Investing, Psychology
“Essentially, all models are wrong, but some are useful.” -George E. P. Box OK kids, gather round for a quick debunking of the usual monthly idiocy. The May Employment Situation report seems to have taken on a special urgency from the carnival barkets, testosterone-poisoned traders, and other ne’er-do-wells working their hardest to…Read More
Category: Employment, Federal Reserve, Psychology
I just submitted my Sunday column into be edited. The topic: You Missed the Big Market Rally? What Do You Do Now? I have my own ideas about what the best response is, but I wanted to open this up to the crowd: What should investors do when they miss a long rally? ~~~…Read More
Category: Investing, Psychology
Click to enlarge Source: Bloomberg from David Wilson of Bloomberg via the terminal: Hedge funds are paying a price for being too hesitant to buy stocks in the midst of a four-year bull market, according to Barry Ritholtz, FusionIQ’s chief executive officer. As the CHART OF THE DAY shows, Hedge Fund Research Inc.’s…Read More
Category: Hedge Funds, Psychology
This is the presentation I gave at the IPI yesterday:
Category: Hedge Funds, Psychology
Since it is a Friday before a 3 day holiday weekend, it is a good time to kick back and think about what the recent market action might (or might not) mean. • Most Day-to-day market action is noise, There is very little signal involved, with the vast majority of commentary simply after-the-fact rationalizations of…Read More
Category: Investing, Markets, Psychology, Rules, Sentiment, Technical Analysis
click for complete infographic The editors at Best Psychology Degrees decided to research the topic of: The United States of Conspiracy 12 of the weirder things Americans believe. – Barack Obama is the anti-Christ (13%) – A “New World Order” is conspiring to rule the world (28%) – The government covered up a UFO crash…Read More
Category: Digital Media, Psychology, Really, really bad calls
What year is it? That seems to be one of the themes that keeps popping up lately. What year is 2013 like? Is it 1999 and we are about to crash? Is it 1982 and we are on the verge of a multi-decade bull run? Or are we heading for a 1987-like debacle? The answer…Read More
Category: Investing, Markets, Psychology
