Behavioral Finance

As we enter the “home stretch” in our look at the “ABC’s” of behavioral investing, it might be important to reflect, for a moment, on how we started.

In our last visit to the “ABCs” of behavioral investing, we looked at fear, greed, and the herd mentality and how they can work together to both instigate and amplify bad investing decisions.

This series of articles provides a look at some of the emotional and behavioral biases—most of which are unconscious—that can affect investing behavior in ways that aren't usually helpful for achieving the best long-term results.

In this series of articles, we’re looking at the emotional and behavioral biases—most of which are unconscious—that can affect investing behavior in ways that aren't usually helpful for achieving the best long-term results.

In the first article of this series, we introduced the broad concepts of behavioral investing, especially the ways in which our human instincts and behaviors—evolved over millennia to keep us safe from environmental threats—tend to work against us when it comes

Legendary economist and investor Benjamin Graham (1894–1976) made a timeless observation, decades ago: “The investor’s chief problem—and even his worst enemy—is likely to be himself.” In other words, our own behavioral biases are often the greatest threat to our financial well-being.

As in every year, the last weeks of 2019 saw a host of predictions and prognostications for the coming year. Many market pundits—including analysts for several major financial firms—were predicting a low likelihood of recession for 2020, worldwide economic expansion, a lackluster future for tech stocks, and other assorted notions.

Many reading this may remember how, only a few months ago, the financial news seemed to be constantly reporting new, all-time highs in the financial markets. In fact, the constant barrage of record-breaking finishes on the Dow, the S&P 500, and other major indexes reached a point where it hardly got anyone’s attention.

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