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Curious Investor Behaviour - Number 7 Hindsight Bias The mind seems to retain information in a series of compressed narratives, and to update "history" as new facts come to light. While efficient in managing memory, this innate habit of hindsight bias can prevent us adequately learning from experience,...

08 September, 2014

Curious Investor Behaviour - Number 6 Anchoring Faced with uncertainty, investors will grasp at any fixed point of reference when forming opinions. In a classic experiment, behavioural psychologists Kahneman and Tversky asked two groups to guess the proportion of African nations that make up the UN. The first group was asked whether the answer...

08 September, 2014

Curious Investor Behaviour - Number 9 Cognitive Dissonance When there is a conflict between our beliefs and reality, we tend to rationalise irrational behaviour. Cognitive dissonance was first observed by Leon Festinger, a psychologist who studied a cult which believed that the earth was going to be destroyed...

08 September, 2014

Curious Investor Behaviour - Number 10 Loss Aversion According to empirical evidence, the pain of losing $100 is felt more than twice as much as the pleasure of gaining the same amount (Kahneman and Tversky, 1992). Sadly, this irrational approach is evident in the stockmarket. Many investors keep...

08 September, 2014

The main reason people go into business for themselves is quite simple – to have more control. For others, wealth creation is the main focus, although small business also brings with it the higher chance of failure and loss. Is the hard work and extra...

08 September, 2014

Reflections on Investment - Number 8 Get Rich Slowly It makes a great deal of sense to compound wealth steadily rather than going for bust. Wouldn't you rather be sure of a good result than hopeful of a great one? Disclaimer: Platinum Asset Management Limited ABN 25 063 565 006 AFSL 221935...

08 September, 2014