Understanding cognitive bias or how to not let your brain sabotage you

Investing can be hard. Finding the right companies. Evaluating their long-term competitiveness. Gauging “market sentiment” and it’s position on the arc from ‘Greed’ to ‘Fear’. Choosing to enter / to exit / to just stay put. Ken Heebner, who ran CGM funds from 1968 to 2016, was a legendary fund manager known for taking gutsy contrarian calls. For over a decade, his fund, CGM Focus returned 18.4% annually, beating the nearest comparable fund by 3.4%. Exceptional by any means. An analysis of investor returns in the fund, dollar-weighted returns taking into account capital flowing in and out, showed the typical

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What your decision-making style says about your behavioral biases

First, a quick quiz Note your score and read on… Biases and Investing One of the foundational principles of this site is that as much as traditional economics likes to think of human beings as rational beings who make decisions based on clear and unchanging criteria, we are actually incredibly flawed in how we perceive and make decisions. Our brains are prone to taking easy shortcuts to avoid expending the energy required to process information objectively before making each decision. And so it is, in investing. This laziness leads to a host of handicaps or behavioral biases that merit their

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