Investing in the stock market is a purely intellectual activity. For this reason, it requires optimizing our rationality and critical thinking so as not to fall into cognitive biases that they lead us to commit investment errors. To better understand how these issues affect us, I bring you in this article 12 phrases by Seth Klarman on behavioral psychology and finance.
12 Seth Klarman Quotes About Behavioral Finance And Psychology
“In investing, as in most things, people like what is popular, modern, exciting and they dislike what is boring, marginal and unpopular. They like assets that have been going up and avoid those that have been falling. "
"Investing, when it seems easiest, is when it is most difficult."
“The vast majority of people are comfortable with consensus, but successful investors tend to have a inclinación contrarian.”
"Most investors tend to project short-term trends, both good and bad, indefinitely into the future."
“Most people lack the courage and stamina to stand apart from the flock and tolerate lower short-term returns to reap the rewards of large long-term rewards. "
"Market irregularities are nothing more than noise that many investors find it very difficult to silence."
"The pressure to keep up with colleagues makes decision-making even more difficult."
"Human nature is so emotional that it frequently clouds the reason causing asset prices to be exceeded in both directions."
“Understanding how our brain works - our limitations, limitless mental shortcuts, and deep-seated cognitive biases) is one of the keys to investing successfully. In BaupostWe believe that it is sometimes easier to predict how investors will act in certain situations than to predict the end of a company's failure. In times of extremes in the markets, by avoiding emotional overreaction by remaining aware of our cognitive biases, it is possible to know market participants better than they know themselves. "
"It is psychologically difficult to fight the crowd, take a contrary position and stay in it."
"Worrying about what can go wrong can lead to long periods of lower returns."
"The stock market is the story of cycles of human behavior responsible for overreactions in both directions."