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4 Pillar

Chap 8

QuestionAnswer
why is a investment that is the topic of everyone's conversation overpriced? too many people have invested in it, true of real estate and gold in late 80's, tiger nations in 90's, and tech companies in late 90's, in each case disaster followed
should you follow the crowd? no, everyone doing the "hot" thing or the same thing should send up a red flag
two helpful strategies Identify the era's conventional wisdom and assume that it is wrong, (present wisdom: stock rtns are much higher than bond rtns) 2. the asset classes with highest rtns are the ones that are most unpopular
why are asset classes with highest rtns the most unpopular?
myopic risk aversion (focusing on short terms losses) one of the most corrosive psychological phenomina experienced by the investor,
risk premium an extra return for bearing the ups and downs of the market
what is the most difficult and emotional task facing any investor? combating myopic risk aversion, this can be done 2 ways: 1. check on portfolio as infrequently as possible, and 2. hold enough cash so that you have a certain equanimity ??? missed this part
why should you cherish randomness in the market? what worked yesterday rarely works tomorrow
is it a safe assumption that there are no patterns? yes, no system, pattern, or guru is of benefit
How can you unify your mental accounting to attain full profit of any asset class you must be willing to keep it after it dives. If you don't you will fail. At EOY, calculate your ROR.
Created by: delorya
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