08-21-2007, 1:41 PM | Post #205175 |
View Complete Thread
It is often said that our worst enemy for investing success looks at us each morning in our mirror.
Jason Zweig was the mutual fund editor at Forbes and is now a senior writer at Money magazine. In his latest book, Jason Zweig has done incredible research on the subject of Neuroeconomics to help us become better investors. These are worthy excerpts to add to our Collection of Investment Gems:
"There may be nothing across the entire spectrum of human endeavor that makes so many smart people feel so stupid as investing does."
"Scientists have made stunning discoveries about the ways the human brain evaluates rewards, sizes up risks, and calculates probabilities."
"Everyone knows that you should buy low and sell high--and yet, all too ofen, we buy high and sell low."
"Everyone knows that beating the market is nearly impossible--but just about everyone thinks he can do it."
"'Financial decision-making is not necessrily about money,' says psychologist Daniel Kahneman of Princeton University. 'It's also about intangible motives like avoiding regret or achieving pride.'"
"As a general rule, the ones who aren't sure are the only ones who are right."
"If you think you're a financial genius, you're almost certainly dumber than you think."
"Although doctors get a bad rap as investors, in my experience engineers are worse. That may be because they are trained to calculate and measure every possible variable."
"People don't need extraordinary insight or intelligence. What they need most is the character to adopt simple rules and stick to them."
"Put at least 90% of your stock money into a low-cost, diversified index fund that owns everything in the arket."
"The stock market constantly generates signals that can goad you into trading."
"Making a financial decision while you're inflamed by the prospects of a big gain is a terrible idea."
"For decades, psychologists have demonstrated that if rats or pigeons knew what a stock market is, they might be better investors than most humans are."
"Our incorrigible search for patterns leads us to assume that order exists where it often doesn't."
"Everyone wants to believe that the financial future can be foretold."
"Millions of investors believe in technical analysis--and in market timing. -- There is little, if any, objective evidence that either tactic works in the long-run."
"Listening to an 'expert' who made a couple of lucky calls is one of the surest ways for an investor to get unlucky in a hurry."
"Once you score big on a few investments in a row, you can be the functional equivalent of an addict--except the substance you're hooked on isn't alcohol or cocaine, it's money."
"It's vital to put sound practices in place before your investing decisions can be whipsawed by the whims of the moment."
"If you think you can earn more than an average of 10% a year from U.S. stocks, you're kidding yourself."
"Even the greatest investors say they are wrong nearly half the time."
"Hot returns come and go, but expenses never die."
"Skip hedge funds entirely."
"Handcuff yourself before you fall prey to the prediction addiction."
"Presented with almost any data, your investing brain will feel it knows what's coming--and it will usually be wrong."
"Whenever some analyst brags on TV about making a good call, remember that pigs will fly before he will broadcast a full list of his past predictions."
"Over ten-year peirods, only about one in three money managers will beat the market. If those odds don't sound appealing to you, do what I do: Invest in an index fund, which merely aims to match the performance of the overall market at rock-bottom cost."
"Financial marketers have such an immense volume of data to slice and dice that they can 'prove' anything."
"Everyone knows that Wall Street strategists can't predict what the market is about to do--but investors still hang on every word from financial pundits who prognosticate on TV."
"The more often people watch an investment heave up and down, the more likely they are to trade in and out over the short term--and the less likely they are to earn a high return over the long term."
"If you're compulsively checking up on the prices of your investments, you're not only hurting your financial returns, you're unnecessarily taking precious time away from the rest of your life."
"We have a terrible time admitting when we don't know something."
"A research team checked the portfolios of the people who claimed to have beaten the market. It turned out that 88% had exaggerated their returns."
"The only thing worse than losing is having to admit that you're a loser."
"It's easy to have illusions about the future if you don't even have a grip on your recent past."
"'Everybody wants to believe that they are special and better than average,' says psychologist Don Moore of Carnegie mellow University. 'They think they can beat the market
Originally posted in thread: 60126