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4 pill Word Scramble

 
 


 

 
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Question Answer
Pillar 3 the psycology of investing 
Are investors rational and behave in the best own self interest?No, this is not true
behavioral financethe study of human nature and how it forces us to make irrational choices
conventional financeassumes that investors only make rational choices
thaylordid research on behavioral finance
basic errors made by humans in estimating probabilitieswork done by Konoman and Chiverski,
t or f human beings are social animals and enjoy sharing their common interesttrue,
disney, microsoft & coco cola (large growth companies)thought to be the best price to own. this drove up the prices, this may happen even though the stocks are not gaining the investor a return
overconfidenceone of the most common of behavioral errors and comes in the form of 1.you can successful pick stocks by following a few simple rules (you have as much a chance of beating industry as starting as a receiver for the Broncos) 2. picking mutual funds
Assumption of the past is predictive of the long term futurethis is an error
recentcywe tend to overemphesize more recent data and ignore older data even if it is more comprehensive
mean reversionperiods of relatively good performance tend to be followed by relatively poor performance
buying hot assets classes of the past several yearsthis is bad odds
If indexing works so well, why do so few do it?because it is boring, you are going to do well, but you are giving up the chance of striking it rich.
What is one of the most common investment traits?the need for excitement, again this is why many do not index
what are the two kinds of riskshort term and long term
short term risk this is that knot in our stomachs when our portfolios drop 5% over the short term
myopic loss aversiona focus on short term dangers and ignoring the more serious long term ones
great company, great stock falacy one of the most dangerous investment erros of all, companies like coco cola, mircosoft, disney and the like, serious investors do the math, amateurs listen to stories,
higilty pigilty growtha great looking companies growth is the same as the market
In the words of Walt Kelly "We have met the enemy and he is us".
Pattern hallucinationmaladaptive behavior