Posts filed under “Psychology”

401ks Are Not Broken, You Are



My Sunday Washington Post Business Section column is out. This morning, we look at the 401k.

The print version headline was What’s the problem with 401(k)s? You while the online version was There’s nothing wrong with 401(k)s, except the players involved.

Here’s an excerpt from the column:

“What’s wrong with these plans? Human behavior, which has managed to turn a relatively simple idea into a complex, overpriced, underperforming mess. Returns have lagged behind a myriad of asset classes doing exceptionally well over the long haul.

The solution is not very difficult: Simplify the plans, reduce the fees, make enrollment automatic and get out of the way.

To understand how to do this better, consider the three parties to any tax-deferred retirement plan, and what each gets out of it: the employer, the employee and the investment-management firm.”

I also got to throw in a snarky comment about Tim Armstrong’s distressed baby foolishness:

“The employer gets a low-cost compensation tool. Nearly all companies — the exception being AOL, which seemingly uses its 401(k) plan to discourage people from working there — use these plans to attract and retain high-quality employees . . .”

The entire column is worth the read . . .


There’s nothing wrong with 401(k)s, except the players involved
Barry Ritholtz
Washington Post, March 9, 2014

Category: 401(k), Investing, Psychology

Blame it on the Weather . . .

In response to this morning’s Polar Vortex discussion, a friend sends this in:   Why Are Wall Street Economists Paid Millions Of Dollars? The answer: to be horrible weathermen.   Source: Zero Hedge  

Category: Humor, Psychology, Really, really bad calls

Polar Vortex be gone! At long last, the end of this terrible winter of discontent is nearing. We can say with some degree of confidence that the light at the end of tunnel is not an oncoming locomotive. Today is very likely to be the pivot day marking the end of this endless season. With…Read More

Category: Cycles, Markets, Psychology

How We Understand Risk: What Kills Us

One of the things that baffles me about people is how they completely misunderstand risk. Lots of my friends panic about things that have no real chance of killing them, but ignore the things that will. This can lead us to make irrational decisions, and sometimes irrational policy. What really will kill us? Watch and learn.

What Kills Us? How We Understand Risk.

Category: Bad Math, Psychology, Science, Video

Why Trolls Start Flame Wars . . .

Internet Psychology 101:  Swearing and Name-Calling Shut Down the Ability to Think and Focus   Psychological studies show that swearing and name-calling in Internet discussions shut down our ability to think. Twi professors of science communication at the University of Wisconsin, Madison – Dominique Brossard and Dietram A. Scheufele – wrote in the New York…Read More

Category: Psychology, Think Tank

What Is Your Focus: Outcome or Process?

Outcome or process — what investment focus succeeds over time? Barry Ritholtz, Washington Post, February 23 2014       “The reason investors and the investment industry rely on performance is because it’s simple, objective and easy to measure. But more importantly, performance goals, performance reviews and performance measurement are so common in business, in…Read More

Category: Apprenticed Investor, Psychology

WealthTrack: Robert Shiller Interview

Robert Shiller, recent winner of the Nobel Prize in Economic Sciences, a Yale professor and the co-creator of the Case-Shiller Home Price Indices discusses the importance of psychology in the markets and what it’s telling him now.
WEALTHTRACK #1035 originally Broadcast February 21, 2014

Source: WealthTrack

Category: Psychology, Video

Grantham on ‘What People Learn from Financial Crises’

I love this: When he was asked what people would learn from the whole financial crisis, Jeremy [Grantham] said, “In the short term a lot, in the medium term a little, in the long term, nothing at all. That would be historical precedent.” -James Montier to Kate Welling, via FT Alphaville  

Category: Bailouts, Markets, Psychology

Risk Aversion at the Country Level

Category: Psychology, Think Tank

The Collective Delusion that is Bitcoin (and All Currencies)

When I first stated traveling for work, I was surprised and amused by the various currencies I saw. Pre-euro, one would encounter a multitude of paper bills of different sizes and colors, each imprinted with a famous man or woman I probably hadn’t heard of. Imagine that: The locals actually believed these silly pieces of…Read More

Category: Currency, Psychology