Behavioral Finance

Your Chief Enemy Today Is Likely Yourself

06/24/2016

Volatile swings like those that followed Thursday night’s Brexit vote aren’t a call to action. They are a call for reason.

Investing’s Timeless Challenge: Patience

05/20/2016

Saturday marks one year since stocks last hit a record high. Here is how to think about this.

The Maddening Mr. Market’s Favorite Trick

04/22/2016

Stocks’ recent upturn isn’t abnormal.

False Fears of a False Dawn

04/12/2016

Stocks’ rally since February 11 is built on fundamental support, not sand. 

Beware Breakevenitis

10/28/2015

We figure few investors bought stocks expecting flat returns, but after negativity some nevertheless fall prey to behavioral errors and sell at breakeven.

Dry Powder Doesn’t Pay

08/31/2015

Waiting for a correction to buy stocks is a fruitless exercise.

Don’t Sweat Sideways Stocks

08/13/2015

Sideways markets are often frustrating, but stocks can move quickly—make sure you’re ready.

The Missing Lesson: Unfriend the Trend

06/26/2015

Beware forecasts that simply extrapolate the year’s start forward.

Funds Behaving Badly

03/26/2015

Discipline is still the key to investing success.

All Over the Map on Europe

03/05/2015

The media’s opinions on eurozone stocks run the gamut. What are investors to make of it all?

Upside Risks Are the Riskiest

01/23/2015

For long-term investors, upside market risk has forever been the most dangerous risk. 

Silver Linings

12/29/2014

Everyone makes mistakes in their portfolio. The best investors embrace their foibles and learn from them. 

MarketMinder’s 2015 Not-Exactly-Annual Portfolio Guide

12/22/2014

Here is our not-exactly-annual guide to thinking about your portfolio as the Earth embarks on another trip around the sun.

Vexing Volatility

12/18/2014

What can investors take away from December's swings? 

Amid Volatility, Beware Your Inner Investing Demons

10/20/2014

With volatility up, investors should be conscious of how their brains may blindside them.

Putting Stocks’ Zigzags in Broader Perspective

10/10/2014

It has been a bouncy start to October, but equity investors must focus on longer time periods than seven trading sessions.

Going Against the Flow?

06/10/2014

Does it matter that stock ownership, by one measure, was at near-record lows 18 months ago?

Corrective Behavior

03/19/2014

How should investors prepare for a possible correction?

No Easy Bull

03/12/2014

What should investors make of recent chatter that the “easy money” days of the bull market are done?

You Get What You Pay For

02/18/2014

Index funds have many fine features, but they can’t help investors fight the biggest stumbling block to long-term success: emotion.

Momentum and Other Fake Market Forces

11/05/2013

When headlines predict big short-term moves, long-term investors should stay cool.

Flash Bang Boom!

08/21/2013

China’s recent “fat finger” error may have investors concerned about flash movements, but their overall impact on performance is overstated.

Assessing Acrophobia

05/10/2013

As several popular indexes have surpassed their past peaks recently, market acrophobia—fear of heights—seems to have increased dramatically. But bull markets don’t share our earthbound proclivities.

Market May I?

05/09/2013

Markets don’t move on Mayan calendars, astronomy or folklore—so we have a hard time seeing why they should move just because it’s May.

Emotional Nevolution

11/01/2012

A new study shows behavioral pitfalls have hindered investors since the dawn of equity markets. How can we fight our emotions?

Costly Clarity

10/27/2011

Investors attempting to wait out current market volatility are likely taking more risk than it’s worth. 

Corrective Action

08/05/2011

Understanding and separating the negatives from the positive realities can help guide your investing decisions.

The Politics of Fear

07/27/2011

White-hot, fear-based rhetoric is flying around the debt ceiling as politicians try to sell their positions. And, some links.

Not So Breaking News

06/27/2011

A primary risk to investors is overemphasizing something old or wrong.

A Not So Trivial Quiz

06/13/2011

The very human tendency to fixate on negative events is a behavioral trait that doesn’t serve investors well.

April Showers Bring May Myths

05/02/2011

May has arrived, and along with it, the often-repeated investing  advice to sell and go away.

Checking the Inner Gut Strategist

04/04/2011

Economic growth and positive market returns continued in Q1 2011. But what of investor sentiment?

Don’t Fool Yourself

04/01/2011

Year after year, crises come and go, and the market carries on.

It’s Not What’s Possible That Counts

03/14/2011

Two events Friday highlight why investing based solely on what’s possible is wrong.

Indicator Acrophobia

02/25/2011

Investors should take a cue from stock markets and ignore when indexes hover at round number thresholds.

Troubles on Emerald Isle?

08/27/2010
Euro-jitters returned after an Irish debt downgrade—but a successful auction and generally healthier financial system show Europe's doing just fine.  

Feelings and Other Tragedies

03/29/2010
Most Americans feel like their portfolios haven't grown over the last year. But feelings are often completely wrong.

The Baby-Talk Indicator

04/29/2009
Consumer confidence reminds us what the stock market already indicated and is not a good predictor for future stock returns.

It’s Just the Opposite

04/24/2009
In bad times, stocks are commonly shunned as permanently damaged goods—history shows no such thing.

Treasuring Treasuries

02/17/2009
Major holders of US government debt aren't about to abandon this important market.  

Time for the Bloodletting!

06/23/2008
What do you get when you combine the subprime mess with recent hedge fund debacles? An archetypal regret-shunning hootenanny!

Zigzags and Wild Polygons

06/12/2008
Stocks have experienced some downward volatility of late. Times like these call for yogic breathing and maybe a little energy work.

A Question of Semantics

01/28/2008
The question of "correction” vs. "bear” is really a question of semantics.

America for Sale

01/16/2008
Fears surrounding foreign governments' investments in US firms is unwarranted. Capital is capital—the freer it flows the better.

Top Market Stories of 2007

12/31/2007
A look back at the top market stories of 2007.

Groundhog Day 2008

12/18/2007
Many of the market gurus have made their 2008 stock market predictions. Before making your own, we'd advise some critical thinking and skepticism.

You Call that Volatility?

12/17/2007
There's nothing unusual or alarming about recent market volatility. Though we may not remember it this way, market volatility is normal and should be expected.

Odds On

12/14/2007
Those looking for the "odds” of a recession are barking up the wrong tree. Economies are not games of chance.

Feel the Flow

12/11/2007
Investors dread decreasing home prices will translate to lower net worth and slower consumer spending. But the Federal Reserve's latest report on the US household reveals the largely unappreciated strength and vigor of the American consumer.

Recession Quiz

12/06/2007
Folks seem to believe the US is headed for a recession. We'd bet most of those folks would fail our quiz.

Proof of Theory

10/18/2007
Investors would be wise to abandon theories and stick to the facts when making portfolio decisions.

Fear

09/11/2007
Acts of terrorism are vile, tragic and significant. But they've accomplished little in the way of decimating the free-market capitalist economies of the west, which today thrive at a near unprecedented pace six years after 9/11.

They’d Rather Be in the Casket

08/27/2007
A recent survey shows folks fear an impending credit crunch more than the specter of terrorism. Meanwhile, T-bill rates are climbing back toward the Fed Funds rate—both very bullish signals.

Who Wants to be Normal?

08/21/2007
When you were young, did you dream that one day you would grow up to be fairly normal? Maybe you really set your sights high and hoped to live an amazingly average life? No? We didn't think so.

High Comedy

07/24/2007
All joking aside, a good sense of humor is vital for investing success.

Height Fright

07/19/2007
New market highs trigger an instinctual, but potentially dangerous, reaction in investors—fear of heights.

Revisionist History

07/06/2007
Russia's attempt at revisionist history is a classic example of a common investor bias.

Danger: the Only Safety

07/05/2007
Stock market history features a litany of dangerous ideas and thinkers in the quest to know what others don't.

Buyback Bonanza

06/14/2007
Well, here we are, midway through June.

52 Card Pick-Up

06/08/2007
Two brothers, ages ten and four, are killing time on a lazy Saturday afternoon.

I Can Has Cheezburger?

06/05/2007
More than awkward grammar and poor spelling, that odd phrase is (perhaps regrettably) a rapidly spreading meme.

Loopy Mind Models

05/18/2007
Mind-bending doesn't begin to describe it.

Obsessing Over Black Swans

05/01/2007
These days there just isn't a lot of big news.

A Perverse Fantasy Life

04/27/2007
Most of life is fantasy.

Stay in May

04/23/2007
Here it comes.

Demand? No Such Thing.

04/20/2007
Equity prices are ultimately determined by basic supply and demand.

Anchors Away

04/10/2007
The streak is over.

Jelly Bean Investing

04/05/2007

"Facts are meaningless. You could use facts to prove anything that's even remotely true!" says Homer Simpson, one of our favorite sages. Rarely has such wisdom come from one so yellow and two-dimensional.

This Ain't a Scene…it's a (Cognitive) Arms Race

03/22/2007
Why are free market-based systems the optimal framework for an economy? One way to understand it is through the brain's evolutionary composition.

New Century, Old Worries

03/12/2007
Have you noticed how quickly theories about the current market correction are being spawned then subsequently abandoned? We went from China, to the carry trade, to hedge funds, to the new "Daylight Savings Y2K", to subprime lending all in about two weeks.

To Seek The Grail

03/02/2007
"Whoso pulleth out this sword of this stone and anvil is rightwise king born of all England.

Stone Age Forecasting

02/26/2007
Do you know Abbey Joseph Cohen? How about Richard Bernstein? If you're an enthusiastic investor who follows the popular press, you probably do.

Fun With Numbers

02/22/2007
  • Over 100 million Americans drink coffee every day…that's over 36.5 billion cups in a year! At about 50 beans per cup, that's over 1,825,000,000,000 beans a year! At that rate, how could we possibly hope to re-grow enough beans for the next year's brew? It's too much of a strain!

When Good is Bad

02/15/2007
The mission of most investors is to find the best companies to put their money into.

I ♥ Investing

02/14/2007
Around here we always say "your brain can trick you.

How Big is Big? Part II

02/06/2007
Yesterday in this space we talked about framing and understanding how big big really is.

How Big is Big?

02/05/2007
Is this a big number? $87,000,000,000 What about this one? $2,900,000,000,000 Are they both big? Is one big and the other bigger? Surely they couldn't be small! Ponder that for a moment…we'll get back to it.

Knowing and Understanding

02/02/2007

- What I cannot create, I do not understand.

- Science is a way of trying not to fool yourself. The first principle is that you must not fool yourself, and you are the easiest person to fool.

Hawkish Behavior

01/20/2007
Nobel prize-winning economist Daniel Kahneman is at it again.

Avoid Some Yearend Pitfalls

12/29/2006
If you're like most people, you're probably indulging in a bit of yearend introspection as 2007 approaches.

Brain Discord

12/09/2006
We have to live with ambiguity and discord every day.

Standard of Misconception

12/07/2006
We aren't going to wax political, or even philosophical, on income inequality or standard of living inequality in the world.

Reckless Teen Investors

11/04/2006
Sharon Begley's science column in today's Wall Street Journal is an insightful look into the psychological underpinnings of reckless teen behavior.

North Korea Can't Nuke Stocks

10/11/2006
Fears are rising around the world over the purported testing of a nuclear weapon in North Korea.

What Happened to the Big Storms?

09/22/2006
Here we are in mid-September of 2006 and not a single hurricane has made landfall in the US.

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