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Cenveo Inc. Message Board

  • william.gram@rocketmail.com william.gram Oct 24, 2013 8:17 PM Flag

    Why Do Smart People Make Bad Investments?

     

    I think the biggest threat that keeps you from making large amounts of sustained wealth is YOU.
    Hindsight Bias: An inclination to think that the world is more predictable than it actually is, based on events that have occurred in the past. Many investment decisions are made with a bias greatly tilted to the past. Just because a security has done well in the past does not mean it will continue to do so in the future.
    Cognitive Dissonance: An inner struggle that exists when evidence is present that tells someone their common beliefs or assumptions are wrong. This is a BIG hurdle for many investors.
    Confirmation Bias: When people purposely seek out information that will confirm the beliefs they already hold to be true, while ignoring information that would contradict those beliefs, they are participating in confirmation. This bias causes people to overestimate their knowledge and underestimate risks, leading to overconfidence in their investment-selection abilities. This spells disaster.
    Sunk-Cost Fallacy: When people continue an irrational behavior just because they feel that they have passed the point of no return. The real pros know to cut losses short and let profits run.
    Communal Reinforcement: When a claim is repeated by members of a community instead of being backed by valid evidence.
    Status Quo Bias: In general people tend to maintain their current path, which has been established by previous decisions. Change is difficult for anyone, because the disadvantages of leaving the status quo loom larger than the advantages.

    I think if we recognize and identify these human "faults," then we can begin to make better investment decisions and definitely stay away for stocks like CVO.

    Sentiment: Hold

    This topic is deleted.
 
CVO
1.75-0.04(-2.23%)Jul 31 4:05 PMEDT