What Works?

Whenever I write about behavioural flaws, I usually get to rely on a legion of academic research papers to explain them. This time I’m starting with some first-hand experience.

Over the past several years (perhaps longer) I’ve been dealing with a pretty strange psychological flaw of my own. It’s probably one of many.

For the most part, I’m…

In his chairman’s letter to Berkshire Hathaway shareholders this year, the billionaire investor Warren Buffett described his group’s investment portfolio as being like a “forest”.

Berkshire’s many and diverse businesses, he said, were its “economic trees”. Like any portfolio, it has an array of specimens (in Berkshire’s case there are vast numbers of them). They range in…

The stock market sell-off late last year was a reminder of how quickly a spell of bearish sentiment can start feeling like a full blown rout. Go-go growth stocks were pegged back, fast momentum plays were pummelled and even high quality firms saw their prices tumble.

Seasoned investors rightly say that short term pain is the price you pay…

There was a good line in a post by the American blogger Ben Carlson back in February 2018. At the time the stock market was in ‘correction mode’, and he made the point that investors always need prepare for turbulence if they’ve got any chance of riding out the pain of falling prices. He wrote: “No amount of…

Share prices have fallen across the board in October, and it’s a reminder of just how quickly fear spreads when stocks start tumbling. My colleague Jack wrote this week about the sense of foreboding that’s hanging in the air at the moment. There’s almost a sense of inevitability that some kind of correction is past due. Knowing how…

Kevfle recently posted an intriguing article called “Can we beat the professionals?’ In this he touched on some interesting questions around the investment industry, which provoked a flurry of responses from our fantastic community here at Stockopedia.

Kevfle seemed to have several questions on his mind, including:

• Can we actually ever outperform the pros?

• Am I wasting my time?

• Is…

Kevfle recently posted an intriguing article called “Can we beat the professionals?’ In this he touched on some interesting questions around the investment industry, which provoked a flurry of responses from our fantastic community here at Stockopedia.

Kevfle seemed to have several questions on his mind, including:

• Can we actually ever outperform the pros?
• Am I wasting my…

First Officer: “Captain - one of our engines is failing.”
Captain: “Set throttle to maximum thrust on the failing engine.”

Even if you have never watched a sci-fi movie before, our captain’s response may sound a little odd to you, and for good reason. Engineering systems are designed to reallocate resources away from failing components and towards working components to…

There’s a line in Warren Buffett’s 2000 letter to Berkshire Hathaway shareholders, where he says: “Nothing sedates rationality like large doses of effortless money.” *

At the time, of course, Buffett was reflecting on two years of “irrational exuberance” that had swept through the U.S. market - propelling the prices of tech stocks (which were then starting to crash…

It’s long been known that bad investment decisions can be caused by our susceptibility to emotions and cognitive errors. But to really understand these behavioural risks and how to avoid them, it helps to see how they work in different ways. The analyst James Montier once used some research about goalkeepers to do just this, and this is how he…

There are many ways to reach success in the stock market… but just like in politics, other people’s methods are often disregarded at best, and attacked at worst. Traders think Investors are boring old stiffs while Investors think Traders are mindless morons. You often see different classes of investors mocking each other’s blogs - technical analysis articles attracting the wrath…

ISA season and the new tax year are as good a time as any for a spot of portfolio spring cleaning. But in making the decisions to add new positions and cut back others, there are potential pitfalls to be aware of. Billions of years of evolution have wired humans to think and act in certain ways - but they’re…

If you are anything like me, when you started investing in the stock market you read furiously to generate ideas. I subscribed to every newsletter I could get hold of. I hunted high and low for stocks that had the capacity to change the world. I searched the web for proof that other investors were buying them. This led me…

I genuinely do sympathise with anyone who started investing in stock markets for the first time in January 2016. It's not been an easy environment - but let’s get one thing straight it’s not exactly been bad. If you've invested through 2000 and/or 2008 you'll know what bad really is and it’s much, much worse than it is now. The…

Here’s a quick test...

Let’s say I offer you this sequence of numbers - 2-4-6 - and ask you to figure out the rule that I used to create it. All you need to do is suggest some more number sequences to see if they fit my rule. I’ll tell you if they do or they don’t.

What…

The study of how human instinct impacts on investment decisions is hotly debated and sometimes controversial. But even Ben Graham, the father of value investing, was aware of the potential for investors to err. He famously warned that “the investor's chief problem - and even his worst enemy - is likely to be himself.”

One of the best known behavioural trap-doors…