Cognitive-Biases-Life-Hack

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Emotions are the main cause and driving force in the stock markets. Last week I shared some thoughts why understanding our mind as a tool that tries to live in an uncertain world is an important challenge. Because the brain hums away invisibly in the background, we tend to overlook its contribution and take it for granted.  Misunderstanding the working of our own mind does not, thankfully, … [Read more...]

Are you investing/trading like a scientist or like a lawyer?

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Before you read on, take a minute and think about this question for a while. Look back at your recent transactions. How did you arrive at those decisions? Are you happy with your past decisions? Any regrets? C’mon.  If you’ve never yelled “How could I have been such an idiot?” at yourself in a fury, you are not an investor and certainly not a trader. Now back to my headline … [Read more...]

A trip to Lake Wobegone

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This trip is for the stock traders among you. What kind of annual return are you aiming for? 30% or 20% or 10%? What’s your number? Humans, and especially those of the male persuasion, have a bias called The Lake Wobegone Effect.  They have the tendency to overestimate one’s own abilities resulting in unrealistic expectations.  It is named after the fictional town created by Garrison … [Read more...]

Without this you will never achieve Financial Freedom

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Enoughism* You have to find, define and fix your personal level of ENOUGH.  Where you possess everything you need, and buying more would actually make you worse off. In my most recent post I have brought up the crucial question: “How much do I need to lead a life that is meaningful, purposeful, and joyful?” Once you have answered that question for yourself, documented it and then never … [Read more...]

Not-Invented-Here-Bias

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Last week I wrote about expensive Mutual Funds / Unit Trusts and their cheaper (and better) alternatives called Exchange Traded Funds (ETFs). You still don’t buy it. Ok, that might be my fault because I am simply not convincing enough that passive, systematic, repeatable investment strategies are the best option for the majority of investors. Or, maybe you could be suffering from the … [Read more...]

The stuff that could make all the difference in your Mutual Funds

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Fees and Expenses. Investors in mutual funds incur two primary kinds of expenses and fees: Fund expenses and loads.  Whereas fund expenses are paid indirectly from fund assets throughout the year, sales loads are one-time fees that investors pay either at the time of purchase or when units are redeemed. Take a deep breath and let’s go for a deep-dive into those expenses Fund expenses cover … [Read more...]

Can you afford to ignore the long-term importance of money?

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“Oh, money,  I’m actually not interested in money.”  So many people say that. Yet they’ll work at a job for eight hours or more (that they don’t even like) just to be able to buy stuff to impress their neighbours, the Tans and Lees (who they don’t really like either), who might be buried in debt—from trying so hard to impress them. Many of you hate financial education.  You think it’s … [Read more...]

Normalcy Bias and a bit of Impact Bias

Yaaawwnn.  The stock markets in the last few weeks have been rather boring and uneventful.  The US-market (measured by the S&P 500) has even entered an unusually long period of volatility contraction.  The daily market moves up a bit and then down a bit.  All in minuscule steps.  We recently have gone through the least volatile period in almost 23 years. This market action can lull one to … [Read more...]

Are you in control?

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The desire to feel like we’re in control seems to be a very basic human need. Are you in control?  Do you like to control your environment? Well?  Were you successful in that endeavour?  C’mon, be honest. Because—Control—is an illusion! Let me give you an example from Singapore: You choose a durian from a street vendor which tastes delicious, so you assume that you are very skilled at … [Read more...]

To stay stress free, take care of your own business and not other’s business

The other day some friends asked me what Tacomob actually means and stands for.  As this is a FAQ I often encounter, let me share my thoughts here: In one sentence, I prefer to Tacomob instead of mentally doing other’s business. What do I mean with “other’s business”? Example thoughts of being in “other’s business”: You need to get a job. I want you to be happy. You should be on … [Read more...]

Zero-Risk Bias

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My brain is flawed.  It is a flawed lens through which I see reality.  This is true of both mouse brains and human brains.  But a human brain is a flawed lens that can understand its own flaws—its systematic errors, its biases—and apply second-order corrections to them.  This, in practice, makes the lens far more powerful.  Not perfect, but far more powerful. Take our zero-risk bias for … [Read more...]

Stuff I read last week – One

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Reading is not too bad an investment of time.   In a short period of time I get to absorb what took someone else years to accumulate, understand, distill, and refine.  There could be so much to learn from what I read.  If I just could remember everything I read. To increase my rate of recall I do talk myself into typing out the core concepts.  This should help.  Albeit only a … [Read more...]

The law of small numbers

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In my previous post I shared a few thoughts on probabilities and statistics.  I wrote about disregarding probabilities in decision making, ignoring small probabilities and not over-weighting small probabilities. A tough act to follow.  I am totally guilty of failing at it. Especially in view of all those solid statistics media, ‘advisors’, and the internet are presenting to me on a silver … [Read more...]

Gambler’s fallacy in a world of uncertainty

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Gambler’s fallacy is a term we often hear.  What is it exactly and how does it affect what you do with your money? It is the belief that future events will be shaped by past events, even when the two have no correlation.  A gambler will assume a coin is due to come up heads after flipping a string of tails, but the outcome of the next fair coin flip is completely independent of the last one—the … [Read more...]

Halo Effect

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This post has nothing to do with Brexit, UK’s ego, or the unfairness in life that the older generation always decides on things the younger generation has to live with. But then, maybe it does … Let’s visit another continent for a while. Who has not heard of Warren Buffett?  For more than 10 years, one of the richest men on the planet.  But did you know that of his current roughly $60 … [Read more...]

Don’t do envy

The GSS – the Great Singapore Sale is upon us again.  And I am not talking about the Singapore stock market here. It’s an opportune time to remind ourselves of that one emotion that is the cause of the lack of wealth in the lives of many.  It is envy. I have briefly written about envy here, and here, before. For me, envy is such a huge lever—negative in this case—to one’s happiness and … [Read more...]

Warning: For serious investors only! PART 2

At the end of part 1 of this blog post we parted with the open question: How were most of these investment legends able to be wrong more often than they were right and still make incredible profits? To analyze the differences the author grouped those investment legends according to certain behaviors they displayed after the investments were made (entry is not as important as so many people … [Read more...]

Warning: For serious investors only!

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Oops, did you click this post by accident?  Or did you conscientiously click it because you do consider yourself a “serious investor” – I mean – serious investor (no irony intended)? I do apologize if my header created any sense of overconfidence in you.  I certainly would not want you to engage in even more risky behaviour. On the contrary. With this post I want to share with you what I … [Read more...]

Back to some basics: Good Debts vs Bad Debts

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I believe in growing our wealth defense is often more effective than offense. And a good defensive approach would be not to get too deeply indebted (money or otherwise). Some people say—follow the Golden Rule—”Don’t get into debt at all.” I say, “It depends.” If you read about rich people and how they got there, you would hardly find anyone who did not take on any debt at some time in … [Read more...]

The only place success can be found before work …

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… is in the dictionary. Have you ever thought for a moment that there really is a shortcut to success without having to put any effort in it? Change your life-style mindset and change your thoughts. Here are some ideas I gathered over time from those “Success books” I read for you to ponder: The components of success are the small choices made every day.  We are all given the same 24 … [Read more...]