Author: Taking Care Of My Own Business

Mere-exposure effect

The time has come again. It’s that time of the year when families gather for reunion dinners, when extended families from far-flung corners of Singapore meet in one central place for the annual “oh-how-have-you-been – when-are-you-getting-married – have-you-gained-some-weight – conversations”. Those events usually never pass without the obligatory gather-everyone-in-one-shot photo taking opportunity (I am speaking from experience here). Once you do spot yourself in the resulting photo, however, your enthusiasm (if any in the first place) plummets. “Eeeiih, why do I look so strange / ugly / thin / bloated / grumpy / cheery?” Take comfort in the fact...

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Luckily I am so lucky

Chatting with one of you the other day over a kopi C (that’s coffee with evaporated milk for my dear non-Singaporean readers) made me realize that you might have gained the wrong perception of me. You might believe that due to my heavy weightage of posts on investing and our biggest flaw in investing (our emotional brain) I might be somehow skilled in finding lucrative investments. Sorry to disappoint you all. My early retirement is not a tale of great investing glories.  It’s merely a story of stumbles and falls (in regards to my stock picking skills).  My nest...

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It is all about the ATTITUDE – yours actually

Yeah, you are so right, I am stating the obvious here and why should you waste your time reading about the obvious. But apparently, it is not as obvious as it should be.  Not to everyone. Just an example. Yesterday morning I had a minor argument with my son (this time my oldest son and not the curious career minded one from my previous post). Me: “Don’t always give up so easily. How well you do in life all depends on your attitude. You have got an attitude problem.” My son: “Attitude. Attitude. ATTITUDE. You always talk about this....

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Economic Forecast Illusion or why “Economist” is one of the worst professions one could choose – Long Version

In my last post I mused over Forecasts and those guys who come up with them.  In my little research I came across so many noteworthy facts and statements on that subject that I decided to collate them in a separate post. Here we go, some 32 randomly listed observations on why Economists have a tough stand: 1) No Economist has ever convincingly explained why a normal economy has to go through booms and busts with recessions and occasional depressions, causing great harm to its people. 2) Economists’ failure to embrace the new science of complexity goes some way towards explaining...

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Economic Forecast Illusion or why “Economist” is one of the worst professions one could choose

Two recent events triggered me to do a bit of research. My son – having started Secondary Level 4 a few days back – asked me which job would be the best and whether he should target the Junior College or Polytechnic as his next step on the educational ladder. I saw multiple headlines in print and online media about Economic Forecasts for 2017 and sometimes even beyond. So, have you ever wondered why Economists work so hard—to analyze data and to churn out forecast after forecast—on future economic developments? Why then, assuming they believe their own forecast, don’t they get some funds (cheap...

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New year, new start, same old, but still the most accurate stock market forecast for 2017

At the beginning of each year, there are many pundits, experts, self-proclaimed gurus, and other suspicious characters who’d like to sell you stuff predicting the directions of the Stock Markets. As I personally have ample years of experience in the Stock Markets (and thus know for sure what’s going on),  I did get asked—by my three friends and my one wife—about my take on 2017. So after thorough research, I am absolutely confident about the high probability of my forecast. Here it is: In the next 12 months, the US-stocks will go up and they will go down.  As...

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Have you decided yet?

This post is for you.  Yes, you, who sent me that e-mail yesterday asking me whether it would be a good timing to start investing in the stock market right now. I understood from your mail that you have not started to invest anything in the stock market.  All savings are in FD and you are – figuratively spoken – sitting on the fence waiting to deploy your savings into the “risky stock market” or maybe not. I believe this is a common scenario for many (most of them unfortunately being also non-readers of financial blogs; but that is...

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The only certainty is …

… that there is no certainty (ok, I admit death is the only thing we can know with any certainty, but my intention is not to write about the end here, I have done that before and it didn’t end too well). Nevertheless, we suffer from the Certainty Bias.  Our mind’s pull for certainty has different consequences.  The mind likes nice, uncomplicated beliefs which can help us make sense of a situation.   Yet these beliefs often leave us trapped by our own – often false – perceptions. Uncertainty is great.  Uncertainty comes in the form of a chance...

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100 Biases and Bias Bias

einhundert – 100 – one hundred The other day I have shared with you this gigantic Cognitive Bias Codex.  It contains 189 different biases.  So far I have written about 100 biases that make you do dumb things with your money.  So, bear with me.  I am merely half way there in gathering awareness about those hidden flaws in my own thinking. Anyhow, this 100-milestone justifies – in my biased eyes – a revisit of my personal Top Bias: Bias Bias is the stubborn belief that we are less biased than we really are. Everyone is prone to cognitive...

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Familiarity Bias vs. Ambiguity Effect

Or otherwise known as reliance on old-fashioned financial institutions and outdated economic structures.  Partly, it is due to habit; partly, because of our concerns about liquidity; and partly, because we think that it is always risky to experiment with new things where we might lack information (“ambiguity”). We seem to want to persist in using the tried financial technology that was used by our grandparents—Savings & Fixed Deposits—even though there may be memories of major economic dislocations in your grandparents’ times. Strangely, we are very happy to adopt the newest smart phones, the latest kind of computers or automotive technology.  We do see rapid...

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Fading Affect Bias

Among the many quirks our brains have is something called the “fading affect bias.”  Basically, we aren’t very good at remembering negative emotions.  Our brains shrink the memories of bad times, painful experiences and anything generally unpleasant. That is generally a good thing. But could it be that we carry this bias into our portfolios as well. That is generally a dangerous thing. Two main ways this bias can lead us astray ONE: The fading affect bias (and its cousin, optimism bias) promotes speculation. Imagine you speculate on a high-flying small cap green-tech stock and it gets obliterated.  If you...

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Cognitive-Biases-Life-Hack

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, prevent the mind from doing its work.  Making errors about the inside of our head doesn’t change what’s there. And that mind of ours tricks us all of the time. We are...

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

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 question: My take is, you would like to belief that you invest like a scientist. Purely interested in objective facts drawing logical conclusions from them.  You might even have...

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A trip to Lake Wobegone

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 Keillor, where “all the women are strong, all the men are good looking, and all the children are above average.” That combination of overconfidence and misplaced expectations are a killer in the markets. Consequently,...

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Without this you will never achieve Financial Freedom

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 change those goal posts in the future, you have set your sights on achieving Financial Freedom.  This implies if you can’t answer that question for yourself you will never ever achieve...

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