Barry Ritholtz: How to Use Behavioral Finance in Asset Management, Part III: "The ugly truth: there is an enormous contingency of players who do not have your best interests at heart... expert at pushing the hot buttons hard-wired into you that is part of your evolutionary inheritance.... This is why we try to teach how to think... [to] see through the bullshit machinery.... Beta vs Alpha: Beta is cheap and easy, Alpha is expensive and hard.... People who create alpha are exceedingly rare; people who can identify them in advance are rarer still. Why should any of us assume we are in either camp? Understanding this gives investors the greatest probability of succeeding...

...My pet peeve has always been the ephemeral, meaningless focus of so much FinTV: “Whats your favorite stock? Where will the Dow be in a year? When will the Fed next raise rates?” These are questions you will never hear me ask on MIB.... Investing based on actual data leads to much better decision-making (and therefor results)  rather than by myth or emotion. Debunking bad ideas, misleading memes, silly television tropes, and other assorted nonsense is an important and worthy goal of ours. Explaining how and why people make bad decisions can only lead to smarter investors.... Markets are cyclical, recessions (outside of Australia) occur once a decade or so; drawdowns are a regular feature of equities, and crashes are inevitable. Once people understand these events are normal and natural, they are less likely to overreact or make bad emotional decisions due to fear or panic...


#shouldread #finance #cognitive

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