Behavioral Portfolio Management
Behavioral Finance Understanding Improves Portfolio Performance |
Behavioral finance is the study of how psychology affects financial decision making and financial markets. It is based on two principles:
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According to Modern Portfolio & Efficient Market Theories; |
“The investor’s chief problem – and even his worst enemy – is likely to be himself.” Benjamin Graham Problem: Emotional Crowds |
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Conclusion: Leaving Money on the Table |
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“Investing isn’t about beating others at their game. It’s about controlling yourself at your own game.” Jason Zweig |
Behavioral Portfolio Management seeks to remove emotions from investing. When emotions are removed, investors are better able to harness price distortions and mitigate cognitive errors by |
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“Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.” Warren Buffet “If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring.” George Soros Put Your Money Where Your Mouth Is |
“The individual investor should act consistently as an investor and not as a speculator.” Benjamin Graham Portfolio Prospectus |
“Price is what you pay. Value is what you get.”
“The stock market is a device for transferring money from the impatient to the patient.”
Warren Buffett
“The stock market is filled with individuals who know the price of everything, but the value of nothing.”
Phillip Fisher