Category - Investing

1
The ABCs of Behavioral Biases (O–R)
2
“It’s Greek to Me!” – Understanding the Meat in Your Investment Statements
3
ABCs of Behavioral Biases; An Introduction
4
5 No-No’s for IRA Investing
5
The 7 Habits of Highly Effective Investors

The ABCs of Behavioral Biases (O–R)

So many financial behavioral biases, so little time! Today, let’s take a few minutes to cover our next batch of biases: overconfidence, pattern recognition and recency. 

Overconfidence

What is it? No sooner do we recover from one debilitating bias, our brain can whipsaw us in an equal but opposite direction. For example, we’ve already seen how fear on the one hand and greed on the other can knock investors off course either way. Similarly, overconfidence is the flip side of loss aversion. Once we’ve got something, we don’t want to lose it and will overvalue it compared to its going …

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“It’s Greek to Me!” – Understanding the Meat in Your Investment Statements

By Eve Kaplan, Certified Financial Planner™

When you look at your monthly investment statement, do you think “this looks like Greek to me”? Do you ignore all but the first page, after checking to see how much money you “made” or “lost” last month? If so, you’re in good company.  However, there’s a lot of meat in your investment statements so here’s a deep dive into some of the important elements:

  1. Don’t just compare changes in account value this month (vs. last month), be aware of sub-components that add or subtract value each month: e.g. “dividends and interest,” “market appreciation/depreciation”
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ABCs of Behavioral Biases; An Introduction

By now, you’ve probably heard the news: Your own behavioral biases are often the greatest threat to your financial well-being. As investors, we leap before we look. We stay when we should go. We cringe at the very risks that are expected to generate our greatest rewards. All the while, we rush into nearly every move, only to fret and regret them long after the deed is done.

Why Do We Have Behavioral Biases?
Most of the behavioral biases that influence your investment decisions come from myriad mental shortcuts we depend on to think more efficiently and act more effectively …

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5 No-No’s for IRA Investing

It is generally well-known that in an IRA account you have a wide range of investment choices. These choices are typically only limited by the custodian’s available investment options.  However, there are specific prohibited transactions that cannot be accomplished with IRA funds. Often these prohibited transactions can cause your IRA to be disqualified, which can result in significant tax and penalty, along with loss of the tax-favored status of the funds.

What’s Not Allowed for IRA Accounts?
  1. Self-Dealing.  You are not allowed, within your IRA, to make investments in property which benefits you or another disqualified person.  A disqualified person
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The 7 Habits of Highly Effective Investors

As Suzanne Woolley writes in her Bloomberg post, she’s identified seven habits of effective investors. I would agree with her on these habits.

  1. Save early, and automatically
  2. Expect financial emergencies
  3. Set an asset allocation, and diversify
  4. Keep fees low
  5. Use an advisor who is a fiduciary
  6. Spend less than you earn
  7. Maximize employee benefits

I would add Avoid leverage and Avoid speculation. You should invest within your risk tolerance and risk capacity. And, think long term for retirement investing and invest more conservatively as you come closer to needing your money for college, cars, or other financial goals.

Dan…

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