A set of rules to develop a behavioral edge – Part 3
Our gut needs training. Many of our instinctive feelings are the exact opposite of what we should be doing.
risk aversion
The inherently short-term nature of the investment management industry
Market conditions are fixed only in part by balance sheets and income statements; much more by the hopes and fears of humanity; by greed, ambition, acts of God, invention, financial stress and strain, weather, discovery, fashion, and numberless other causes impossible to be listed without omission
Fear and investing
The house of fear has many windows
Overcoming mistaken short term thinking with Kahneman style risk policies
Reduce or eliminate the pain of the occasional loss by the thought that the policy that left you exposed to it will almost certainly be financially advantageous over the long run
The psychology of probability
Probabilities are at the heart of investing. We look at examples of our human frailties in assessing probabilities.
The psychology of risk
Risk aversion is an unwillingness to take on a risk in spite of the fact that the reward amply justifies the risk taken
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