In truth, Mr. Market’s emotional problems are the least part of it. What he really suffers from is behavioral biases and a propensity to make cognitive errors.
Probabilities are at the heart of investing. We look at examples of our human frailties in assessing probabilities.
If you don’t know what framing is, it’s a wonder you survived this long. We can defend against misframing when others use it against us. But, as important, we can learn to be alert to our own lack of perspective and reframe our own view of things to our advantage.
The greatest failing of most investors, both professional money managers and individual investors, is a failure to understand the impact of their own very human behavior and that of stock market participants as a whole.
When we own a stock, let’s face it, we love to see articles and reports that confirm our positive view of our investment. It’s human nature. It makes us feel good. On the flip side, we tend not to see or notice negative opinions.
We need to have full confidence in our judgement about a company if we are to make a serious financial commitment to it. But, the strength of our belief that we are right has nothing to do with the validity of our judgement. And, if that sounds weird, blame in on behavioral psychology.