Perhaps the hardest thing to do on the way to becoming a successful investor is unlearning everything you think you know about financial markets and the economy. The difficulty lies in admitting you do not know very much at all. Face it: You probably will not be able to add extra return to your investments by using your “knowledge” of […]

David Swenson is an investment success story. As overseer of Yale University’s endowment fund for the last 20 years, he has helped it grow to $15 billion by beating the stock market with annualized returns of 16% per year. Swenson hires and oversees active money managers who buy and sell based on their outlooks for individual stocks, industries, and the […]

How many times have you assumed that what’s happened in the past will continue in the future? For instance, if your trash collector has been showing up early every morning, it seems a pretty good bet that you better get the garbage out the night before, rather than waiting until after breakfast on pickup day. He won’t necessarily show up […]

A common misconception among investors is that an investment portfolio in retirement should be “conservative” because a retiree cannot afford to “lose” money. Unfortunately, investors often use the wrong definitions of the words “conservative” and “lose.” Too often, investors are worried about current—and usually short-term—market fluctuations. They fear “losing” money when the stock market falls. That temporary decline in value […]

Our minds work in funny ways, and one of the most fascinating traits involves our tendency to hang our decisions on irrelevant information. Behavioral psychologists call this tendency “anchoring.” We see it in the investment markets when investors come to regard the price at which they bought an investment as more significant than any other price, or when their predictions […]

First impressions count, but, unfortunately for many investors, they may count too much. The human tendency to rely on first impressions and stick with them despite later evidence to the contrary has been dubbed “confirmation bias” by cognitive researchers. It is a form of mental shortcut that allows us to make decisions when faced with a lot of information. However, […]

Ever since the big bear market of 2000-02, individual investors have been leery of the stock market. Still reeling from big losses and battered by scary headlines about the dollar’s decline, rising interest rates, and trade and budget deficits, they have flocked to “alternative” investments that promise big returns not tied to the stock market. Hedge funds have been the […]