Weather vs. Climate

Notice how TV news bulletins put finance next to the weather report? In each, talking heads point at charts and intone about intraday events that are quickly forgotten. Meanwhile, the long-term wealth building story gets overlooked. Many investors feel that they are not properly informed about the financial world unless they have checked daily, or even hourly, on how the […]

Familiarity Bias: Don’t “Invest In What You Know”

Every investor is familiar with the phrase, “invest in what you know.” Taking this advice leads to an undiversified portfolio with higher risks and lower returns. This psychological tendency is called familiarity bias, which must be avoided in order to become a diversified investor. I’ve noticed that many people have a significant portion of their retirement savings devoted to their […]

MasterChef of Investing

In the popular TV program MasterChef, contestants face a series of cooking challenges. From low quality ingredients to inadequate preparation and poor implementation, so many things can, and do, go wrong. It is a bit like investing. In the world of investment, there customarily are two broad approaches. The first is a traditionally active one: Managers attempt to find mispriced securities […]