Читать книгу Behavioral Portfolio Management - C. Thomas Howard - Страница 7

Successful investing is emotionally difficult. It often requires waiting for long-term results when your portfolio was recently pummelled, recommending an investment when others think it is a dog, investing when volatility is high, and often looking and acting different from the Crowd. To be a successful investor, you must make a conscious decision to control your natural reactions and instead focus on decisions that flow from careful and thoughtful analysis. Staying disciplined in an emotionally-charged, 24-hour news cycle world is a challenge.

I believe that releasing your emotional brakes and then harnessing the price distortions created by the cognitive errors of others are the two most important things you can do in building a successful portfolio. The primary focus of this book is how to avoid becoming part of Emotional Crowds and, instead, develop into a successful BDI. In short, release and harness. The motivation for doing so is simple: on average Crowds underperform while their counterparts, BDIs, reap superior returns.

Behavioral science has introduced new terminology that aids in this transition, with concepts such as representativeness, availability cascades, loss aversion, peak-end memory, WYSIATI (what you see is all there is), anchoring, mental accounting, myopic loss aversion, social validation, phantastic objects, and many more. An important step in releasing your emotional brakes is to adopt this new terminology. It gives you the ability to see emotional decision making for what it is and reduce the chance of being swept away by the Crowd.

To be clear, this book is not about banishing emotions, for they play a central role in decision making and, without them, we would not have survived as humans and would be unable to function today. Rather, this book is about mastering your emotions and at the same time uncovering the role emotions play at every level of the investing process. You can be a very spiritual and emotional person, as am I, while at the same time making investment decisions based, not on emotion and intuition, but on careful, data-rich analysis. Such an approach leads to success in the world of investing.

Along the way I will discuss why it is important to shed many a conventional wisdom and instead look underneath the hood to determine what is really going on. Often conventional wisdom is catering to investor emotions and provides the basis for industry best practices (read emotional catering). Digging into the data and seeing for yourself what is really going on often reveals quite a different story.

So the steps to become a BDI are:

1 understand the dynamics of Emotional Crowds;

2 understand how an emotional investor makes decisions;

3 release your own emotional brakes, the first step of which is adopting a new terminology;

4 avoid the emotional conventional wisdom of the investment industry; and

5 harness behavioral price distortions.

This brings up an important consideration when becoming a BDI. By its very nature, you are often thinking and speaking differently than the Crowd. If social validation is important to you, then this will be a very difficult transition to make. I have been in this role my entire career. My wife frequently reminds me that I am tough to take out in polite company, since my views are so often different from the typical person. I bite my tongue often in social situations, but my being this way pays off handsomely in the stock market!