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The Behavioral Investor QUOTES

The Behavioral Investor QUOTES

1 " But the paradox in owning our personal mediocrity is that it makes us, in the strictest sense of the word, exceptional. It is not about believing in yourself - in fact, it’s quite the opposite. It’s about realizing that the less you need to be special, the more special you’ll become… Exceptional investment outcomes are attainable by all of us, if we just stop trying so hard. "

― , The Behavioral Investor

2 " Far from seamlessly assimilating new ideas into our existing belief framework, research shows that we actually tend to get more firm in our cherished beliefs when those beliefs become challenged. "

― , The Behavioral Investor

3 " So much of human behavior - political, religious, financial - can be explained by the fact that we want to think the best of ourselves and don’t want to work very hard to do it. "

― , The Behavioral Investor

4 " Equity markets provide an exception to the heuristic that social coherence trumps logic. You were born to fit in, but investing requires you to stand out. You are wired to protect your ego, but success in markets demand that you subvert it. You are programmed to ask, “Why?”, but must learn to ask, “Why not? "

― , The Behavioral Investor

5 " The fact that your brain becomes more risk seeking in bull markets and more conservative in bear markets means that you are neurologically predisposed to violate the first rule of investing, “buy low and sell high.” Our flawed brain leads us to subjectively experience low levels of risk when risk is actually quite high, a concept that Howard Marks refers to as the “perversity of risk. "

― , The Behavioral Investor

6 " In a path-breaking work on the nature of bubbles, Greenwood, Shleifer and You (‘Bubbles for Fama’) share some fascinating findings. Among the most compelling is that only a slight majority of bubbles actually burst. "

― , The Behavioral Investor

7 " When a proposal to change a certain parameter is thought to have bad overall consequences, consider a change to the same parameter in the opposite direction. If this is also thought to have bad overall consequences, then the onus is on those who reach these conclusions to explain why our position cannot be improved through changes to this parameter. If they are unable to do so, then we have reason to suspect that they suffer from status quo bias. "

― , The Behavioral Investor

8 " Prepare for bursting bubbles without being too fine-tuned to them. "

― , The Behavioral Investor

9 " Once these basic needs are met, quality of life has less to do with buying happiness and more to do with individual attitudes. "

― , The Behavioral Investor

10 " While we tend to think of bear markets as risky, true risk actually builds up during periods of prosperity and simply materializes during bear markets. During good times, investors bid up risk assets, becoming less discerning and more willing to pay any price necessary to take the ride. "

― , The Behavioral Investor

11 " Humans are wired to act; markets tend to reward inaction. "

― , The Behavioral Investor

12 " Understanding the impact of human physiology on investment decision-making is an underappreciated area of study that represents a unique source of advantage for the thoughtful investor. "

― , The Behavioral Investor

13 " Revisiting Batnick’s periods of low real returns using Shiller CAPE, we also observe that long periods of poor performance often begin with overvaluation that is worked off over time. The Shiller CAPE levels of the broad market on January 1 of each the years cited above were as follows: 1929 – 27.06 1944 – 11.05 1965 – 23.27 2000 – 43.77 Today – 28.80 Mean – 16.67 "

― , The Behavioral Investor

14 " Intuition is the silent coming together of a lifetime of learning and must be cultivated if it is to be useful. "

― , The Behavioral Investor

15 " The behavioral investor understands and seeks to mimic the best parts of passive investing - low turnover, rock bottom fees and appropriate diversification - without succumbing to absentminded buying and selling. "

― , The Behavioral Investor

16 " This book could have easily been three words long: automate, automate, automate. It likely wouldn't have sold well, and you might have ignored the advice on account of it seeming too simple, but the fact is that many of the thornier elements of emotion can be done away with entirely by slavishly following a system of investment rules in all types of market weather. "

― , The Behavioral Investor

17 " Being a behavioral investor is less about adhering to some textbook notion of rationality and more about understanding and bending the idiosyncrasies of human nature to our advantage. "

― , The Behavioral Investor

18 " For a factor to be worthwhile to a behavioral investor it must be empirically supported, theoretically sound and behaviorally intransigent. "

― , The Behavioral Investor

19 " One of the things that makes adhering to probabilities so difficult (and profitable) for an investor is that emotion has a pronounced impact on how we assess probability. Predictably, positive emotion leads us to overstate the likelihood of positive occurrences and negative emotion does just the opposite. This coloring of probability leads us to misapprehend risk… All too often we confuse the intensity of our longing with the probability of our winning. "

― , The Behavioral Investor

20 " Considered from a behavioral lens, diversification is humility made flesh, the embodiment of managing ego risk. Diversification is a concrete nod to the luck and uncertainty inherent in money management and an admission that the future is unknowable. "

― , The Behavioral Investor