Chap 8
Quiz yourself by thinking what should be in
each of the black spaces below before clicking
on it to display the answer.
Help!
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| why is a investment that is the topic of everyone's conversation overpriced? | too many people have invested in it, true of real estate and gold in late 80's, tiger nations in 90's, and tech companies in late 90's, in each case disaster followed
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| should you follow the crowd? | no, everyone doing the "hot" thing or the same thing should send up a red flag
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| two helpful strategies | Identify the era's conventional wisdom and assume that it is wrong, (present wisdom: stock rtns are much higher than bond rtns) 2. the asset classes with highest rtns are the ones that are most unpopular
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| why are asset classes with highest rtns the most unpopular? |
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| myopic risk aversion (focusing on short terms losses) | one of the most corrosive psychological phenomina experienced by the investor,
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| risk premium | an extra return for bearing the ups and downs of the market
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| what is the most difficult and emotional task facing any investor? | combating myopic risk aversion, this can be done 2 ways: 1. check on portfolio as infrequently as possible, and 2. hold enough cash so that you have a certain equanimity ??? missed this part
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| why should you cherish randomness in the market? | what worked yesterday rarely works tomorrow
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| is it a safe assumption that there are no patterns? | yes, no system, pattern, or guru is of benefit
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| How can you unify your mental accounting | to attain full profit of any asset class you must be willing to keep it after it dives. If you don't you will fail. At EOY, calculate your ROR.
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Review the information in the table. When you are ready to quiz yourself you can hide individual columns or the entire table. Then you can click on the empty cells to reveal the answer. Try to recall what will be displayed before clicking the empty cell.
To hide a column, click on the column name.
To hide the entire table, click on the "Hide All" button.
You may also shuffle the rows of the table by clicking on the "Shuffle" button.
Or sort by any of the columns using the down arrow next to any column heading.
If you know all the data on any row, you can temporarily remove it by tapping the trash can to the right of the row.
To hide a column, click on the column name.
To hide the entire table, click on the "Hide All" button.
You may also shuffle the rows of the table by clicking on the "Shuffle" button.
Or sort by any of the columns using the down arrow next to any column heading.
If you know all the data on any row, you can temporarily remove it by tapping the trash can to the right of the row.
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Created by:
delorya
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