No One Is Perfectly Objective And That Costs

Some thoughts on why investors do less well than they could.

“The average investor’s return is significantly lower than market indices due primarily to market timing.”  Daniel Kahneman

“Investments usually perform better than investors.”  John Bogle

“Optimism is not an investment strategy”
Seth Klarman

“Since security values reflect investors’ perception of reality and not necessarily reality itself, overvaluation may persist for a long time.”
Seth Klarman

“Happiness won’t buy money.”
Michael Bloomberg

“Benjamin Graham used to say, ‘It’s not the bad investment ideas that fail; it’s the good ideas that get pushed into excess.”
Charlie Munger

You notice the common thread.  Emotion. Greed and fear go a long way to explaining some behaviours.  Impatience coupled with over-confidence the rest.

It is unusual for anyone to be objective about value.  It is hard even to know what it is.  That difficulty is further confused by stock prices that arise from the emotions of the rest of the world’s citizens.

The thing to remember is that emotions eventually balance out.  Greed turns into fear pretty readily.  Luck evens out.  Timing the market loses even though it looks easy enough.

Be objective and have someone that can call you on the emotional content of your decisions.

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario.  In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you.  866-285-7772

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