Thread about Behavioral edge in investing (Just sharing some personal thoughts, not recommendations).
I'm firmly in the camp that believes that investing is as much behavioral as it is intellectual/analytical (assuming Tech/Reg lowered the Information & other type of edges).
I'm firmly in the camp that believes that investing is as much behavioral as it is intellectual/analytical (assuming Tech/Reg lowered the Information & other type of edges).
On the behavioral side, the best edge that individual investors can develop is in having the discipline and patience for the long term, while learning to deal with extremely good & bad times in the interim.
For me, the behavioral aspect is more useful to keep me in the Mkt all the time (cash % might vary), while trying to think/act different during periods of high $VIX, corrections/bear mkts or even when there's been an extended period of low VIX (suggesting complacency in Mkts)
W/o getting too scientific, let's say that the Right brain handles feelings/emotions and the Left brain is more analytical/logical. You ideally want the feelings and actions to be in sync most of the time.
It is during the periods of extreme stress or extended periods of calm, that I find breaking this sync to be more useful.
In short, separating the actions from the emotions & not doing things that seem comfortable at the moment but actually detrimental to the long-term plans.
In short, separating the actions from the emotions & not doing things that seem comfortable at the moment but actually detrimental to the long-term plans.
When things are going great - a little less chest pumping and practicing some caution.
When things are going terrible - a little less sulking, and building up the courage/conviction and taking actions that you're going to be proud of in few years when things are back to normal.
When things are going terrible - a little less sulking, and building up the courage/conviction and taking actions that you're going to be proud of in few years when things are back to normal.
I view this as an effort to reduce sensitivity w.r.t Market. Let's see if these illustrations convey the idea better.
@awealthofcs @iancassel @IntrinsicInv @BluegrassCap @Gautam__Baid @GavinSBaker @JohnHuber72 @saxena_puru @ROIChristie @TMFJMo @OphirGottlieb @TihoBrkan
@awealthofcs @iancassel @IntrinsicInv @BluegrassCap @Gautam__Baid @GavinSBaker @JohnHuber72 @saxena_puru @ROIChristie @TMFJMo @OphirGottlieb @TihoBrkan
Some of this is actually easier for the Individual investors to do (once they understand their biases, develop the fortitude to stick to the plan) than for Professionals who also have to deal with Clients/expectations/redemptions.
Investing is a funny biz at the extremes.
When everyone is doing high-fives, is when it's better to be folding your hands & think.
When everyone is running scared, is when it's better to stay calm & think.
When things are normal, feel free to mix with the crowd & have fun.
When everyone is doing high-fives, is when it's better to be folding your hands & think.
When everyone is running scared, is when it's better to stay calm & think.
When things are normal, feel free to mix with the crowd & have fun.
In short, I like the Crowd except when the Party's already too loud or when the Party's too depressing.
Thank you for reading. 🙏
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Thank you for reading. 🙏
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