I find that, unfortunately, to be terribly true. For those of you who may be unfamiliar with Kahneman, he is a professor at Princeton and Nobel laureate. He is notable for his work on the psychology of judgment and decision-making, and behavioral economics. |
Archives of “livelihood” tag
rss30 NUGGETS OF STOCK MARKET WISDOM
“Wall Street people learn nothing and forget everything.” Ben Graham
“ Buy on the cannons, sell on the trumpets.” Old French Proverb
“A stock broker is one who invests other people’s money until its all gone.” Woody Allen
“It is fortunate for Wall Street as an institution that a small minority of people can trade successfully and that many others think they can.” Ben Graham
“Wall Street indices predicted nine out of the last five recessions!” Paul Samuelson
“ There are two kinds of investors, be they large or small: those who don’t know where the market is headed, and those who don’t know that they don’t know. Then again, there is a third type of investor –the investment professional, who indeed knows that he or she doesn’t know, but whose livelihood depends upon appearing to know.” William Bernstein
“The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind.” Gordon Gekko
“It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.” George Soros
“October: This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” Mark Twain
“If past history was all there was to the game, the richest people would be librarians.” Warren Buffett
“Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway.” Warren Buffett
“A market is the combined behavior of thousands of people responding to information, misinformation and whim.” Kenneth Chang
“The four most dangerous words in investing are “This time it’s different”. John Templeton
“Money can’t buy you happiness but it does bring you a more pleasant form of misery.” Spike Milligan
“If you don’t follow the stock market, you are missing some amazing drama.” Mark Cuban
“The average man doesn’t wish to be told that it is a bull or a bear market. What he desires is to be told specifically which particular stock to buy or sell. He wants to get something for nothing. He does not wish to work. He doesn’t even wish to have to think.” Jesse Livermore
“In this business if you’re good, you’re right six times out of ten. You’re never going to be right nine times out of ten.” Peter Lynch
“ Markets can remain irrational longer than you can remain solvent” John Maynard Keynes
“The markets will return to rationality the moment you have been rendered insolvent.” Dennis Gartman
“Risk is good. Not properly managing your risk is a dangerous leap” Evel Knievel
“Sometimes your best investments are the ones you don’t make.” Donald Trump
“The most predictable thing about the stock market is the number of experts who take credit for predicting it.” Dave Weinbaum
“I have probably purchased fifty ‘hot tips’ in my career, maybe even more. When I put them all together, I know I am a net loser.” Charles Schwab
“Money talks… but all mine ever says is good-bye.” Anon
“Don’t gamble! Take all your savings and buy some good stock and hold it ‘till it goes up, then sell it. If it don’t go up, don’t buy it.” Will Rogers
“Give me a stock clerk with a goal and I’II give you a man who will make history. Give me a man with no goals and I’II give you a stock clerk.” James Cash
“Never make forecasts, especially about the future.” Samuel Goldwin
“Stocks are bought on expectations, not facts.” Gerald M. Loeb
“Your success in investing will depend in part on your character and guts, and in part on your ability to realize at the height of the ebullience and the depth of despair alike that this too shall pass.” John Bogle
“You make most of your money in a bear market, you just don’t realize it at the time.” Shelby Davis
William Bernstein: There Are Two Kinds Of Investors
There are two kinds of investors, be they large or small: those who don’t know where the market is headed, and those who don’t know that they don’t know. Then again, there is a third type of investor – the investment professional, who indeed knows that he or she doesn’t know, but whose livelihood depends upon appearing to know.”
William Bernstein
Three Myths of Trading Psychology
Myth #1: Emotions are at the root of trading problems. Yes, emotions can interfere with concentration and performance, but that doesn’t mean that they are a primary cause. Indeed, emotional distress is as often the result of poor trading as the cause. When traders fail to manage risk properly, trading size that is too large for their accounts, they invite outsized emotional responses to their swings in P/L. Similarly, when traders trade untested patterns that possess no objective edge in the marketplace, they are going to lose money over time and experience an understandable degree of emotional frustration. I know many successful traders who are fiercely competitive and highly emotional. I also know many successful traders who are highly analytical and not at all emotional. Trading is a performance field, no less than athletics or the performing arts.Success is a function of talents (inborn abilities) and skills (acquired competencies). No amount of emotional self-control can turn a person into a successful musician, football player, or trader. Once individuals possess the requisite talents and skills for success, however, then psychological factors become important. Psychology dictates how consistent you are with the skills and talents you have; it cannot replace those skills and talents.
Myth #2: Anyone, with dedicated effort, can get to the point of trading for a living. That is nonsense. How many people make their living from acting or musical performance? What proportion of people playing sports can actually make their livelihood from athletics? Many people play chess or poker, but how many can sustain a living from it?Quite simply, to make a living from any performance activity means that you are consistently good at what you do. Not everyone has the talent, skill, or drive to be that successful—in any field. Across the many traders I’ve met in various settings, from home-based, independent traders to professional ones in firms, the best predictors of trading success have been the size of the trader’s account and the resources available to the trader. If a person were to make 30% per year on their accounts year after year, they would be among the world’s most successful money managers. Most money managers of mutual funds, hedge funds, and pension funds cannot sustain such performance. This leads the trader to accept huge leverage and court a risk of ruin when an inevitable string of losing trades occurs. Indeed, such excess leverage is a main cause of emotional distress in trading. Take a look at how the Turtles made their money: they learned a trading method, learned to be consistent with that method, and were given enough money by Richard Dennis that they could trade multiple markets with enough size to scale into positions in each. Even with those resources, not all of the Turtle students could succeed. Talent, skill, and opportunity are the ingredients of success, and these are relatively normally distributed in the trading population, just as they are relatively normally distributed in the population at large. (more…)