Daniel Crosby > Quotes

“The psychology of individuals – warts and all – must be a central consideration in the formulation of any practical investing approach. The good news here is that others’ misbehavior will consistently and systematically create opportunities for you. The bad news is that you are prone to all of the same quirks and are just as likely, in the absence of strict adherence to the rules, to create the same opportunities for others.”
― Daniel Crosby, The Laws of Wealth: Psychology and the secret to investing success

“The fact that people are fallible is your biggest enduring advantage in the accumulation of greater wealth. The fact that you are just as fallible is the biggest impediment to that very same goal.”
― Daniel Crosby, The Laws of Wealth: Psychology and the secret to investing success

“The fact that your brain becomes more risk seeking in bull markets and more conservative in bear markets means that you are neurologically predisposed to violate the first rule of investing, “buy low and sell high.” Our flawed brain leads us to subjectively experience low levels of risk when risk is actually quite high, a concept that Howard Marks refers to as the “perversity of risk.”
― Daniel Crosby, The Behavioral Investor

“Imagine a world where you could gain more knowledge by reading fewer books, see more of the world by minimizing travel and get more fit by doing less exercise. Certainly, a world where doing less gets you more is highly inconsistent with much of our lived experience, but is just the way Wall Street Bizarro World operates. If we are to learn to live in WSBW (and we must), one of the primary lessons to be learned is to do less than we think we should.”
― Daniel Crosby, The Laws of Wealth: Psychology and the secret to investing success

“What I am proposing here is that you consistently bet on inconsistency. What I am asking you to do is bet unfailingly on the failures of human reason, which is a sure bet indeed. It is a painful thing to admit that education, intellect and willpower are inadequate to make you the type of investor you would like to be, but it’s not as painful as losing money.”
― Daniel Crosby, The Laws of Wealth: Psychology and the secret to investing success

“Never underestimate the power of doing nothing.” – Winnie the Pooh”
― Daniel Crosby, The Laws of Wealth: Psychology and the secret to investing success

“I began this process without preconceptions of how the information would shake out. Five consistent types of behavioral risk emerged: Ego, Emotion, Information, Attention, and Conservation. The number of bad decisions we can make is limitless (have you seen reality TV?), but all behavioral risk has one or more of these five risk factors at its core.”
― Daniel Crosby, The Laws of Wealth: Psychology and the secret to investing success

“The lessons for behavioral investors are unavoidable: you must automate your process wherever possible and avoid bias in the selection of people and processes. To do otherwise is to believe that professional money managers are actually above the fray of human bias, when the evidence shows us otherwise.”
― Daniel Crosby, The Laws of Wealth: Psychology and the secret to investing success

“Far from seamlessly assimilating new ideas into our existing belief framework, research shows that we actually tend to get more firm in our cherished beliefs when those beliefs become challenged.”
― Daniel Crosby, The Behavioral Investor: How psychology shapes wealth, risk, and investment decisions

“Understanding the impact of human physiology on investment decision-making is an underappreciated area of study that represents a unique source of advantage for the thoughtful investor.”
― Daniel Crosby, The Behavioral Investor

“In a path-breaking work on the nature of bubbles, Greenwood, Shleifer and You (‘Bubbles for Fama’) share some fascinating findings. Among the most compelling is that only a slight majority of bubbles actually burst.”
― Daniel Crosby, The Behavioral Investor

“H.A.L.T. – that would also serve investors very well. The acronym stands for hungry, angry, lonely, tired and is a reminder to abstain from making important decisions in any of these emotional states.”
― Daniel Crosby, The Behavioral Investor

“The behavioral investor understands and seeks to mimic the best parts of passive investing - low turnover, rock bottom fees and appropriate diversification - without succumbing to absentminded buying and selling.”
― Daniel Crosby, The Behavioral Investor: How psychology shapes wealth, risk, and investment decisions

“Revisiting Batnick’s periods of low real returns using Shiller CAPE, we also observe that long periods of poor performance often begin with overvaluation that is worked off over time. The Shiller CAPE levels of the broad market on January 1 of each the years cited above were as follows: 1929 – 27.06 1944 – 11.05 1965 – 23.27 2000 – 43.77 Today – 28.80 Mean – 16.67”
― Daniel Crosby, The Behavioral Investor

“Let me say with all forthrightness that the [Rule-Based Behavioral Investing] model is not perfect and that some years following its principles won’t even beat a passive market cap weighted index. But what it does do is tilt the odds in your favor by consistently exploiting the psychological failings of your opponents in the market.”
― Daniel Crosby, The Laws of Wealth: Psychology and the secret to investing success

“Get rich fast and get poor fast are opposing sides of the same coin.”
― Daniel Crosby, The Laws of Wealth: Psychology and the secret to investing success

“Equity markets provide an exception to the heuristic that social coherence trumps logic. You were born to fit in, but investing requires you to stand out. You are wired to protect your ego, but success in markets demand that you subvert it. You are programmed to ask, “Why?”, but must learn to ask, “Why not?”
― Daniel Crosby, The Behavioral Investor: How psychology shapes wealth, risk, and investment decisions

“[You’ll] learn how to improve your investment experience, increase returns formerly sacrificed to misbehavior, and worry less about “The economy” as you become increasingly focused on “My economy.”
― Daniel Crosby, Personal Benchmark: Integrating Behavioral Finance and Investment Management

“While we tend to think of bear markets as risky, true risk actually builds up during periods of prosperity and simply materializes during bear markets. During good times, investors bid up risk assets, becoming less discerning and more willing to pay any price necessary to take the ride.”
― Daniel Crosby, The Behavioral Investor

“Given the complexity of life, the enormity of the decisions we are called upon to make, and most peoples’ unfamiliarity with financial principles, it is much less a question of whether people will simplify the information they process and recall and more a question of how they will simplify.”
― Daniel Crosby, Personal Benchmark: Integrating Behavioral Finance and Investment Management

“There are at least three significant reasons we resist contemplating our personal financial goals: it can be stress-inducing, we dislike numbers, it is socially taboo, and we are slaves to “right now.”
― Daniel Crosby, Personal Benchmark: Integrating Behavioral Finance and Investment Management

“The next time you feel as though you must buy or sell a security, or that you are certain of where the financial markets are headed, take a moment to explain, in detail, the factual reasons why this is so. You’re likely to find that your enthusiasm has gotten the best of your brain and nothing brings them back into sync like having to teach.”
― Daniel Crosby, The Behavioral Investor

“But the paradox in owning our personal mediocrity is that it makes us, in the strictest sense of the word, exceptional. It is not about believing in yourself - in fact, it’s quite the opposite. It’s about realizing that the less you need to be special, the more special you’ll become… Exceptional investment outcomes are attainable by all of us, if we just stop trying so hard.”
― Daniel Crosby, The Behavioral Investor: How psychology shapes wealth, risk, and investment decisions

“For a factor to be worthwhile to a behavioral investor it must be empirically supported, theoretically sound and behaviorally intransigent.”
― Daniel Crosby, The Behavioral Investor: How psychology shapes wealth, risk, and investment decisions

“If irrational exuberance can bring about financial calamity, then it stands to reason that rational adherence to a set of rules can save our financial lives. It’s not a complex idea, but it’s one that can have profound implications for the personal and financial wellbeing of our families and even our nations. And it all begins with a focus on-you guessed it-ourselves.”
― Daniel Crosby, Personal Benchmark: Integrating Behavioral Finance and Investment Management

“Humans are wired to act; markets tend to reward inaction.”
― Daniel Crosby, The Behavioral Investor

“Once these basic needs are met, quality of life has less to do with buying happiness and more to do with individual attitudes.”
― Daniel Crosby, The Behavioral Investor

“Prepare for bursting bubbles without being too fine-tuned to them.”
― Daniel Crosby, The Behavioral Investor

“Statman, Thorley and Vorkink found that investors absolutely “confuse brains with a bull market,” attributing their own success to skill and not the fact that a rising tide had lifted all boats.69 As a result, trading volumes were found to rise dramatically following good times and fall precipitously in bad times, effectively buying high and selling low.”
― Daniel Crosby, The Behavioral Investor

“Thales of Miletus was the founder of the school of natural philosophy, a contemporary of Aristotle and one of the seven sages of ancient Greece. Tasked with inscribing short words of wisdom onto the Temple of Apollo at Delphi, Thales was asked what the hardest and most important task of humanity was, to which he replied, “To know thyself.” He was then asked the inverse and replied that “giving advice” was the thing least profitable to humankind that came very easily.”
― Daniel Crosby, The Behavioral Investor