Posts filed under “Psychology”
There is a terrific PDF (warning — its 105 pages) on the Seven Sins of Fund Management. 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."
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
Dresdner Kleinwort Wasserstein, November 2005