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 seeking
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
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
Thoughts on beating the market
No investment decision should ever be motivated by trying to beat the market. The moment this impulse creeps in, the investor is liable to risk seeking behavior.
The special risks of investing a windfall gain
Investors always need to be alert for things that make us risk seeking. Risk seeking is bad. Risk seeking is being willing to take a risk even if the chances of success are poor. Risk seeking causes investors to lose money.
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