Читать книгу Behavioral Portfolio Management - C. Thomas Howard - Страница 14

On the first day of my securities class, I would lay out a $1, $5, $20 and $100 bill on the front table. I would then ask the class which they would choose. I got puzzled looks from the students, wondering whether this was some kind of trick or whether I had lost my marbles.

After some assurances from me, they all agreed that they would pick the $100 dollar bill. I then explained that the four bills represented the expected payoff on four different investments, with the same holding period and equal initial investments. Not surprisingly, they all again chose the $100 investment.

I further explained that each of the four investments represented somewhat different levels of risk, with the $100 investment the least risky (this last point being contrary to conventional wisdom, as I explain further in Chapter 12). But the real difference across the four investments was that there was considerably more emotion associated with the ever larger payoffs. Now the choice was not so clear. It was obvious that they were trying to conduct some sort of return, risk, emotion trade-off.

The four investments are proxies for choices typically available to investors. The $1 bill represents an investment in default-free treasury bills, the $5 bill an investment in bonds, the $20 bill an investment in the stock market, and the $100 bill an investment in an active equity portfolio earning an excess return. The payoffs roughly capture the relationship of ending values for each of these investments over a long time period, say 30 years.

I then challenged the students by stating that over their investment lifetimes few will choose the $20 investment and a countable, small number will choose the $100 investment. Instead, most will build portfolios heavily made up of $1 and $5 investments. They will do this because they apply emotional brakes during the investment process and, what is worse, will be encouraged to do so by the emotion enablers that currently dominate the investment industry.

Consequently the typical investor leaves hundreds of thousands if not millions of dollars on the table during their investing lifetime, because they aren’t able to release their emotional brakes and the industry does little to encourage them to do otherwise.