In his famous book, A Random Walk Down Wall Street, Burton Malkiel said, “A blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would do …
Investing Blog
How to Beat a Dart-Throwing Monkey
The Benefits of Being an Informed, Rather than a Reactive, Investor
After experiencing the highs and lows of the Investor Psychology Cycle, people tend to become frustrated and tired of speculation. The silver lining is that they’ve reached an excellent mental …
Breaking the Cycle of the Investor’s Dilemma
Inflation eats away at money languishing in a bank or under a mattress. The fear of making a mistake rightly makes us pause before sinking our savings into an investment …
Recognizing the Emotional Cycle of the Investor’s Dilemma
The chart below illustrates the emotional roller coaster underlying the Investor’s Dilemma. You will probably recognize some of the emotions. If an investor’s account balance increases, he tends to feel …
Definition: Transaction Cost
Transaction costs are fees or commissions charged by the broker whenever he buys or sells an investment. Reacting emotionally and deciding to sell when you hear bad news about a …
Information Overload and Emotional Decision Making
There are over 10,000 publicly traded stocks and 30,000 mutual funds. How can anyone possibly know which are good or bad investments? How can you determine what factors will positively …
Financial Concept: The Law of Large Numbers.
One way mutual fund managers achieve a four to five-star Morningstar rating is by taking advantage of the Law of Large Numbers. A manager who actively or passively manages a …
Financial Concept: Probability Theory
Probability is the analysis of random phenomena that teaches us it is not possible to predict the outcome of discrete events, such as the chance that a stock will either …
Elements of the Investor’s Dilemma
Investors typically fear not having enough money to live comfortably when they retire, or becoming a burden to family and friends in their old age. They also have a fear …
Financial Concept: The Investor’s Dilemma
A successful investment strategy requires understanding more than the technical factors involved in growing your investment. It also requires understanding the very real role that emotion plays – not only …