Investor Psychology
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It’s a good book. I liked it, and I’ll summarize the findings. First of all, I’ll say that it’s an extraordinary book, where the opinions presented are based on research. What do sumo wrestlers and schoolteachers have in common? This chapter discusses how motivation affects people and shows that even professionals in respected fields, like…
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Value investing seems very simple – you buy a stock when it’s below its intrinsic value and sell it when it exceeds that intrinsic value. But in reality, making the right decisions is much more difficult, even if we could see the intrinsic value with mathematical precision and have better knowledge compared to the entire…
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Many investors believe they are Dr. Jekyll, but research confirms that Mr. Hyde lives within each of them. As researchers say, we humans struggle to assess the “beast” that lives within each of us, and controlling it during emotional stress is almost impossible (I think this is not news for devout Christians). The table below…
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When viewed through the lens of human behavior, even a fundamental economic model like the principle of equilibrium in demand and supply curves comes into question… The issue is that economic models rely on the assumption of human rationality, which doesn’t quite align with reality. The demand-supply model suggests that the driving forces behind demand…
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We make decisions based on the principle of relativity and then consider them “rational.” This also happens when making investment decisions, especially when we use the multiples method in the valuation of organizations. How does this work in practice? When we have two organizations with different attributes to compare, it’s difficult to make a comparison.…
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“Many want to be long-term investors, but as the graph shows, few succeed. As behaviorists say, the problem is fundamental for investors. Last week, I read this book: The Little Book of Behavioral Investing by James Montier, which very well describes the mistakes that investors make. In this note, I will focus on just one…