Successful investing is an active rebellion against one’s instinctual proclivity to sabotage long-term returns.
In a perfect world, investing is like gardening. You cut the weeds (losers) and water you flowers (winners).
In practice, investors do the opposite.
In a perfect world, investing is like gardening. You cut the weeds (losers) and water you flowers (winners).
In practice, investors do the opposite.
We tend to sell winning stocks too early (cutting the fruit) while desperately clinging to losing positions (watering the weeds).
This habit is called the Disposition Effect.
This habit is called the Disposition Effect.
Coined by Shefrin and Statman in 1985, the Disposition effect explains the tendency for investors to cut their winners short while riding their losers lower.
It’s an academic way of saying, “most investors suck.”
It’s an academic way of saying, “most investors suck.”
In this essay, we’ll explain the Disposition Effect, why we fall victim to it, and how we can fight against our tendency to fall into its trap.
macro-ops.com/disposition-ef…
macro-ops.com/disposition-ef…
• • •
Missing some Tweet in this thread? You can try to
force a refresh
