Behavioural Finance

A Hidden Bias Is Killing Your Returns

Until recently, it was frustrating trying to convince you to become an evidence-based investor. Part of the problem was persuading you that brokers and self-appointed stock market gurus are emperors with no clothes. There’s no credible evidence anyone has the expertise to reliably and consistently pick outperforming stocks, tell you when to get in and out of the market or pick the next “hot” mutual fund manager.

Tracking error is not a risk, you are

Research has shown that small cap, value, and high profitability stocks have higher expected returns than the market. They also exhibit imperfect correlation with the market. Building a portfolio that tracks the market, and then increasing the portfolio weight of small cap, value, and high profitability stocks increases the expected return and diversification of that portfolio. From a human investor’s perspective, the problem with higher expected returns is that they are expected, not guaranteed. And that imperfect correlation?

Behavioural Finance
Black Car Accident Side Wreck Road

Buy a Car to Become a Better Investor

Recently, I went shopping for a new car. I now understand why a survey from Edmunds.com found that a significant percentage of Americans consider the process of new car buying so distasteful they would give up sex, Facebook and their smartphones to avoid it.

Personal Wealth
Basketball Skills

Luck vs. Skill

On March 2nd, 1962, Wilt Chamberlain scored 100 points for the Philadelphia Warriors in a 169 – 147 win over the New York Knicks. This set the NBA single-game scoring record which still stands today. The game was not televised, in fact, no video footage of the game has ever been located. The stadium was only half full, and no members of the New York press were present. Audio recordings do exist, but only of the fourth quarter.