Archive for July 3, 2013

What Modern Day Investors can Learn from Ulysses ‘BeesWax in Your Ears’ Strategy

Think about this pattern for a minute.
At the top of the market we can’t buy fast enough.
About three years later at the bottom, we can’t sell fast enough.
And we repeat that over and over until we’re broke.
No wonder most people are unsatisfied with their investing experience.
- Carl Richards (The Behavior Gap)

Greed / Buy - Fear / Sell © www.behaviorgap.com

Greed / Buy – Fear / Sell © www.behaviorgap.com

The problem is to recognize that, in aggregate, investors tend to be very bad at timing the market. The other problem is that though we recognize this as self-destructive behavior, we will still fall prey to the proverbial ‘Siren Call.’

So whats the solution?

Professor Shlomo Benartzi (UCLA; of the ‘Saving for tomorrow, tomorrow‘ TED video fame – dont miss the part where he says – “Self-control is not a problem in the future. It’s only a problem now when the chocolate is next to us”) has a very simple yet powerful antidote to remedy this age-old behavioral short-coming.

He calls upon investors to make an Ulyssesan Contract: a decision made in the present to bind oneself to a particular course of action in the future. » Read more..

Goals v/s Everything Else

Reaching Your Goals

Reaching Your Goals – for more of Carl’s insightful sketches on Behavioral Finance visit www.behaviorgap.com

Begin with the “WHY?”

Ask yourself these questions:  Why are you earning, why are you saving, why are you investing??

I highly doubt you said, “So I can beat the SENSEX.”

What you probably said was something like, “So I can send my kids to college,” or “So I can retire early,” or “So I can take a trip around the world.”

And yet some investors’ actions seem to suggest they’re focused on something else: beating the market. » Read more..