History shows that mutual fund investors generally increase inflows after observing periods of strong performance. They
buy at high prices when future expected returns are lower, and they sell after observing periods of poor performance when future expected returns are now higher.
This results in what author Carl Richards called the “behavior gap,” in which investor returns are well below the returns of the funds in which they invest. Perhaps with this observation in mind, Warren Buffett once said, “The most important quality for an investor is temperament, not intellect.” View full article »
In the past few decades, the fortunate among us have recognised the hazards of living with an overabundance of food (obesity, diabetes) and have started to change our diets. But most of us do not yet understand that news is to the mind what sugar is to the body. News is easy to digest. The media feeds us small bites of trivial matter, tidbits that don’t really concern our lives and don’t require thinking. That’s why we experience almost no saturation. Unlike reading books and long magazine articles (which require thinking), we can swallow limitless quantities of news flashes, which are bright-coloured candies for the mind. Today, we have reached the same point in relation to information that we faced 20 years ago in regard to food. We are beginning to recognise how toxic news can be.
News misleads. Take the following event (borrowed from Nassim Taleb). A car drives over a bridge, and the bridge collapses. View full article »
I still believe Fooled by Randomness is the best work by Nassim Nicolas Taleb and then he add n over it by Black Swan followed by The Bed of Procrustes. Here are some thing which I found Philosophical and Practical Aphorisms :-
- The three most harmful addictions are heroin, carbohydrates and a monthly salary.
- To bankrupt a fool give him information.
- Education makes the wise slightly wiser, but it makes the fool vastly more dangerous
- The best revenge for a Liar is to convince him that you believe what he said. View full article »
Having trouble deciding whether you should worry more about the European banking crisis, the U.S. debt cliff or the slowdown in China? If so, you are not alone. But perhaps it is time to take a step back and consider how those worries are affecting your ability to think rationally.
The great expert on this question is the Nobel Prize winning psychologist, Daniel Kahneman. His best-selling book, Thinking, Fast and Slow, describes Mr. Kahneman’s intellectual journey in discovering how humans are hard-wired to make the wrong decisions much of the time.
Among the unhelpful mental biases that Mr. Kahneman discovered is our tendency to be overconfident about our ability to predict the future View full article »
Sometimes watching Discovery/National geographic channel provokes to you create your own ideas which could easily be implemented in your life. Presenting you the collection of rules could be implemented in your profession :-
The Power Nine: Rules to successful trading
1. Move: Always be flexible. The beauty of the stock market is polygamy is perfectly acceptable. Never get married to a particular position or a particular strategy. The market is complex, View full article »
Two recent articles, Was Benjamin Graham Skillful or Lucky? (WSJ), and Ben Graham’s 60-Year-Old Strategy Still Winning Big (Forbes), have thrown the spotlight back on Benjamin Graham’s investment strategy and his record. In the context of Michael Mauboussin’s new book The Success Equation, Jason Zweig asks in his WSJ Total Return column whether Graham was lucky or skillful, noting that Graham admitted he had his fair share of luck:
We tend to think of the greatest investors – say, Peter Lynch, George Soros, John Templeton, Warren Buffett, Benjamin Graham – as being mostly or entirely skillful.
View full article »
Most investors are no doubt familiar with the standard disclaimer “Past performance is not indicative of future results.” This compliance truism tends to stay in the fine print, both on paper and in investors’ minds, when they make decisions on the basis of real-time market dynamics.
Even if investors purport to buy into the logic of the “random walk” argument about security prices, in practice they tend to extrapolate recent history into the future (termed recency bias in behavioral finance) when making portfolio View full article »
A spurious tail is the performance of a certain number of operators that is entirely caused by luck, what is called the “lucky fool” in Taleb (2001). Because of winner-take-all-effects (from globalization),spurious performance increases with timeand explodes under fat tails in alarming proportions. An operator starting today, no matter his skill level, and ability to predict prices, will be outcompeted by the spurious tail. He published a paper shows the effect of powerlaw distributions on such spurious tail.
Taleb’s maverick thoughts became more famous from the The Bed of Procrustes – Here are some of them that I could recall :
The three most harmful addictions are heroin, View full article »
A week ago finished reading The Snowball “Warren Buffet and the Business of life” by Alice Schroeder. It’s full of surprises, such as how Buffett had three leading ladies for two decades, and how his 1960s home was an accidental outpost of the counterculture.
But I’m more interested in how Buffett made his money. And while there’s few new facts about Buffett’s deals in The Snowball, the biographical format does put them into context. You get to see what makes him tick.
Here are seven interesting things I learned about Warren Buffett from The Snowball, View full article »
Happy Dhanteras. If you buy gold today, you’ll become rich tomorrow. Except for gold merchants.
Who sell gold & become rich today only.
Jokes apart Yesterday I was going through the commentary provided by Satyajit Das to a financial daily that was focused on “The return of the Golden age”. He quotes Investors have poured money into exchange traded funds that buy gold. Some central banks are now rebuilding View full article »