Category: Behavioral Finance & The Value Investor

Articles, podcasts, videos, books and links dedicated to subject of  Behavioral Finance and/or The Value Investor

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A “Dog Whistle” Guide to the Financial Media

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A “Dog Whistle” Guide to the Financial Media

We are all too familiar with “dog whistles,” defined as coded language intended to appeal to a group of people in a subtle way.

The use of “dog whistles” is endemic in the financial media. They’re very adept at it, which makes it insidious and dangerous to your financial well-being.

Here’s my take on some commonly used “dog whistles,” and what they really mean.

Read on at DanielSolin.com right here: A “Dog Whistle” Guide to the Financial Media

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Why Investing is Hard

Investing is hard. In fact, it is so hard that the combination of a decent income, financial literacy, and financial discipline is so rare that it effectively functions as a superpower. Today we’re going to talk about twelve reasons why investing is so difficult.

# 1 You Need to Have Something to Invest

Inexperienced investors focus on the investment, while those in the know focus on having something to invest. Having something to invest requires three things:

  1. A reasonable income
  2. The discipline to not spend your entire income
  3. Avoiding loss of earnings/capital through divorce, death, disability, liability, and speculative investments

You’re going to need a fair amount of each of those things to be successful, although you can often make up for a low amount of one of them with an extreme amount of another.

Continue reading at The White Coat Investor right here:   https://www.whitecoatinvestor.com/why-investing-is-hard/

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Investing Answers You Won’t See in the Financial Media

DECEMBER 27, 2018 BY DAN SOLIN

We have entered that time of year where the financial media goes into overdrive, dispensing more misinformation than usual.  The trigger is end-of-year prognostications about next year.

They are meaningless.  Relying on them can impair your financial well being.

If the financial media was honest, here are the answers it would give to commonly asked questions.

Are stocks overvalued?

We don’t know.  All we know is markets go up over time.

Continue reading right here: Investing Answers You Won’t See in the Financial Media

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10 Years and 10 Lessons from the Financial Crisis

10 years. It feels like yesterday. Then again, sometimes when I look at the economic data it feels like it never even happened. Whether you feel like the crisis is a distant memory or still lingering I think we can all agree that these kinds of big events serve as important lessons for understanding how we will navigate the future. So, 10 years later, here are 10 big lessons I take away from the financial crisis:

  1. Fear wins in the short-term and loses in the long-term. This is probably the number one lesson from the crisis. Human beings have been making tremendous progress for thousands of years. The financial markets are largely a function of irrational short-term beliefs inside of a one way upward trend of progress. So while there will be plenty of times to be scared the high probability bet is that optimism will generally beat pessimism.

Read the full article at Pragmatic Capitalism right here:   https://www.pragcap.com/10-years-10-lessons-financial-crisis/

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I Told You Index Investors Were Smarter, 2008 Agrees

Summary:

  • Index investing and index funds get blamed for moving the markets higher as investors ‘blindly’ add new monies.
  • There’s more evidence that many of the Indexers stayed the course in the last major correction as well.
  • Those silly indexers, getting an investment plan and sticking to that investment plan.
  • As I’ve often suggested, the smartest investment style is likely to attract the smartest investors.
  • Have a read, we can learn a thing or two from 2008 and the performance of ETFs and Indexers.

Read the full article at Seeking Alpha right here:  https://seekingalpha.com/article/4207060-told-index-investors-smarter-2008-agrees

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What Makes A Great Investor? by Andrew Thrasher

“There are many ideas to what makes a “great” investor. Different qualities exemplify themselves in different market climates as we’re always being tested from different angles. Whether it’s our Commander and Chief firing up his Twitter app one morning, a break of a major support level on a chart, a surprise corporate announcement, or simply the madness of crowds moving a stock or the market as a whole in a new direction.

Mark Sellers, a former hedge fund manager, made (what became) a well-known speech at Harvard about what it takes to become a great investor. His no b.s. take is refreshing, thought-provoking, and challenging to anyone who hopes to eclipse the massive heard of our industry. While I don’t believe Mark’s take on what makes a great investor to be the end-all-be-all to what it takes to success in finance, I do find his points of interest as one view from one corner of the finance community. With that, whole speech is worth a read but I’ve pulled out some of his main points….”

Read on: http://www.athrasher.com/what-makes-a-great-investor/

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The Psychology of Money

Let me tell you the story of two investors, neither of whom knew each other, but whose paths crossed in an interesting way. Grace Groner was orphaned at age 12. She never married. She never had kids. She never drove a car. She lived most of her life alone in a one-bedroom house and worked her whole career as a secretary. She was, by all accounts, a lovely lady. But she lived a humble and quiet life. That made the $7 million she left to charity after her death in 2010 at age 100 all the more confusing. People who knew her asked: Where did Grace get all that money? But there was no secret. There was no inheritance. Grace took humble savings from a meager salary and enjoyed eighty years of hands-off compounding in the stock market. That was it. Weeks after Grace died, an unrelated investing story hit the news. Richard Fuscone, former vice chairman of Merrill Lynch’s Latin America division, declared personal bankruptcy, fighting off foreclosure on two homes, one of which was nearly 20,000 square feet and had a $66,000 a month mortgage. Fuscone was the opposite of Grace Groner; educated at Harvard and University of Chicago, he became so successful in the investment industry that he retired in his 40s to “pursue personal and charitable interests.” But heavy borrowing and illiquid investments did him in. The same year Grace Goner left a veritable fortune to charity, Richard stood before a bankruptcy judge and declared: “I have been devastated by the financial crisis … The only source of liquidity is whatever my wife is able to sell in terms of personal furnishings.” The purpose of these stories is not to say you should be like Grace and avoid being like Richard. It’s to point out that there is no other field where these stories are even possible.

— Read on www.collaborativefund.com/blog/the-psychology-of-money/