New Behavioral Investing Podcast

18th Feb '18 by iwright7

8 comments 5071 reads

For those of us trying to control our irrational investing behavior there is an interesting new Podcast with Dr Daniel Crosby the author of, “The Laws of Wealth: Psychology and the secret to investing success”.

Daniel is a rules based value/quality/momentum investor, so his thinking will chime with many Stocko readers….

Enjoy. Ian

https://soundcloud.com/technical-analysis-radio/daniel-crosby-author-of-the-laws-of-wealth-ep18

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Iwright7

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8 comments

gus 1065

18th Feb '18

Hi Ian.

Thanks for the link - interesting topic. My key takeaways from this were:- the importance of long term historical context; the value of being able to teach/explain a subject to reinforce one’s understanding; and the benefit of developing an independent thought process to avoid the temptation of mindlessly following the crowd. I’ve ordered a copy of Crosby’s book (which was presumably part of the reason for him doing the podcast!).

Gus.

iwright7

18th Feb '18

Gus,

Yes lots of takeaways, many of which I have come across before, but not all in one chunk. I liked his analogy of us all claiming to know how a flush toilet works until we have to write this down, or explain it to others - So it is with investing.

I will order his book, because I have found in the past, that even if I only pick up one good actionable point it vastly covers the cost. I see that he has a new book coming out in October 2018, so I will put this on my wish list too.

https://www.amazon.co.uk/Behav...

Taff6

18th Feb '18

Hi Ian
Great post, thanks, thumbs up from me
regards J

jonesj

18th Feb '18

Thanks for posting the link Ian, that's a very interesting podcast.

Also, don't be put of by the "technical analysis radio" title. This is pretty much all behavioural investing & has nothing to do with technical analysis. [For better, or worse, some of us have no interest in technical analysis]

iwright7

19th Feb '18

jj

Daniel suggests that for most of us automated rules based investing will out-preform the market. Perhaps as a nod to Technical Analysis he suggests that Momentum is the premier market anomaly.

I personally think that a combination of rules + factors + anomalies with human judgement work best. But to make the "best" judgement it is important to understand the rationale for the first 3.

gus 1065

23rd Feb '18

Hi Ian.

“The Laws of Wealth” duly received via Amazon and an easy read through on a cold a Friday afternoon. Lots of good insights both in general terms on good and bad investor behaviour followed up by a practical framework for using rules based investment to avoid the identified pitfalls. No earth shattering revelations but plenty of applied common sense.

In essence his 5 P’s system for investing is a high VQM strategy supplemented by C, M and Z-score hurdles to avoid “pitfalls” and a follow the money approach on “people” i.e. insider investors, looking for material director buys/company buybacks and healthy dividends (rather than relying simply on what they say).

Quite easy to screen (apart from the last “follow the money” element). Also in the process of putting together a portfolio page to use as a health check on my existing holdings (already aware of several bad habits!).

Well worth a read. Thanks again for the lead.

Gus.

iwright7

24th Feb '18

Gus,

My copy of The Laws of Wealth arrived this week and I have just finished it - An easy read.

My comments largely mirror yours: In part 1 Daniel promotes rule based investing to avoid human biases and story stocks. In part 2 he advocates a Value/Quality/Momentum framework with a sprinkling of F-Score and Risk management.

My only criticism is that Daniel leaves it up to us to determine his screening model, but in everything but name, the principle he promotes are high score Stockrank selection. A great book for anyone starting to invest and trying to figure out the rationale behind factor investing. I am leaving this feed back on Amazon too. Ian

AnonymousUser252054

24th Feb '18

He talks about 'courage' and refers to research which shows on average a fund manager's top five conviction holdings outperform by 5.72% - 6.25% per year but 'closet indexing' results in overall fund under-performance. 'We've got to have the guts to do it (stock-picking) in appropriate doses to make a meaningful impact'.

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Iwright7

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