Wheel of Emotion

February 28, 2019

The link below is an illustration of “Prospect Theory” which is an important element of Behavioural Finance – a component of which describes the impact of our behaviour on our investments. Prospect Theory states that for every good result a person sees, 1 unit of emotion is gained. But, when a bad result is seen, 2 units of emotion are lost. A loss has twice the impact of a gain. The Wheel of Emotion linked below explains how excessive checking of our investment performance leads to stress which can lead to poor decisions.

Link to article

Happiest Headline of the Month: “Investors are hiding out in cash: Assets in money market funds surge past $3 trillion”

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How a Stock Market Turns Investors into Gamblers

Please consider reading this article if you ever feel the stock market is a gamble.

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On The Morality Of Capitalism

“Capitalism is usually seen as an economic way of life—about the creation and distribution of economic goods, not about moral or social outcomes. Yet it is in fact a social system—about human interaction on many levels.

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History, Forecasting and the Irony of it all

“We do not have, never have had, and never will have an opinion about where the stock market, interest rates or business activity will be a year from now.”

—Warren E. Buffett, the world’s most admired, least imitated investor, in his annual letter to shareholders 30 years ago this month, dated February 28, 1989

Although Warren Buffett’s track record is undeniable and deserves the admiration of investment managers – he truly is the least imitated investment manager on the planet. As a strict value stock picker – he does not time the market and therefore does not try to predict the market or economy.   His focus is on understanding the true value of the stocks he purchases and buys them when their price is at least 25% below his valuation. He knows trying to predict what the economy, interest rates, let alone what stocks will do over the short term is a waste of time.

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