There are times when great investment opportunities are as plain as they appear. We tend to expect complexity, so we find it hard to accept that the market sometimes throws up extraordinary bargains. Don't look a gift horse in the month....
As outlined in previous commentaries, there have been some further slight reductions in the risk free rate which delineates the threshold between Fully Priced and Overpriced. The return available on a five year term deposit from a major Australian Bank now stands at 4.0%, and...
Curious Investor Behaviour - Number 1 Phase Myopia At different phases of the market, our perspective changes. In the steepening down phase there is a tendency to take an ever-narrower view of the facts, focusing on near-term risk rather than longer-term reward. Conversely, a developing bull market inspires...
Curious Investor Behaviour - Number 2 Heuristic Simplification According to Nobel laureate Herbert Simon, people are so swamped with information that they react consciously to only a tiny part of it. We adopt rules of thumb instead of absorbing the entire data. In general, shortcuts serve us well,...
Curious Investor Behaviour - Number 3 Confirmation Bias Once we have made a decision or formed a view, we subconsciously emphasise information which reinforces that view; at the same time, we tend to downplay contradictory information. The confirmation bias is perhaps the most subversive of all behavioural...
Curious Investor Behaviour - Number 4 Over-Confidence According to multiple studies into human behaviour, the majority of people consider themselves superior in most day-to-day activities - for example, over 90% of drivers believe they are better than average! Over-confidence is a particularly dangerous trait in the field of investment....