Behavioral Finance Quotes

“Our goal is more modest: We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”
― Warren Buffett

“Groups have powerful self-reinforcing mechanisms at work. These can lead to group polarization—a tendency for members of the group to end up in a more extreme position than they started in because they have heard the views repeated frequently.
At the extreme limit of group behavior is groupthink. This occurs when a group makes faulty decisions because group pressures lead to a deterioration of “mental efficiency, reality testing, and moral judgment.” The original work was conducted with reference to the Vietnam War and the Bay of Pigs fiasco. However, it rears its head again and again, whether it is in connection with the Challenger space shuttle disaster or the CIA intelligence failure over the WMD of Saddam Hussein.

Groupthink tends to have eight symptoms:
1 . An illusion of invulnerability. This creates excessive optimism that encourages taking extreme risks. [...]
2. Collective rationalization. Members of the group discount warnings and do not reconsider their assumptions. [...]
3. Belief in inherent morality. Members believe in the rightness of their cause and therefore ignore the ethical or moral consequences of their decisions.
4. Stereotyped views of out-groups. Negative views of “enemy” make effective responses to conflict seem unnecessary. Remember how those who wouldn't go along with the dot-com bubble were dismissed as simply not getting it.
5. Direct pressure on dissenters. Members are under pressure not to express arguments against any of the group’s views.
6. Self-censorship. Doubts and deviations from the perceived group consensus are not expressed.
7. Illusion of unanimity. The majority view and judgments are assumed to be unanimous.
8. "Mind guards" are appointed. Members protect the group and the leader from information that is problematic or contradictory to the group's cohesiveness, view, and/or decisions. This is confirmatory bias writ large.”
― James Montier, The Little Book of Behavioral Investing: How not to be your own worst enemy

“If you are wearing yellow goggles, every blue thing will appear green to you. It is your perception, and it is your reality.”
― Naved Abdali

“Human behavior and information bias play a huge role in transaction prices. It creates short-term opportunities that can be exploited.”
― Naved Abdali

“Economic conditions may differ from period to period, but human psychology is embedded among us and will not change.”
― Naved Abdali

“Identical information can lead to opposite conclusions based on relative perceptions of its receivers.”
― Naved Abdali

“Humans are not machines. They analyze information through the lenses of their experience, knowledge, and cognitive biases. All of it makes their perception, their
unique viewpoint.”
― Naved Abdali

“If anyone could anticipate a market drop, no one would ever invest in the market above the level to which it will decline. That is to say, market corrections are unforeseen events.”
― Coreen T. Sol, Unbiased Investor: Reduce Financial Stress and Keep More of Your Money

“Since money is fungible, efforts to save small amounts on small purchases are absurd if you ignore them during pricier transactions. $1.75 is still worth $1.75.”
― Coreen T. Sol, Unbiased Investor: Reduce Financial Stress and Keep More of Your Money

“Once bitten, twice shy isn't a very good investment strategy.”
― Coreen T. Sol, Unbiased Investor: Reduce Financial Stress and Keep More of Your Money

“More often than not, extreme events revert to the mean—the average—for no other reason than that result is more likely.”
― Coreen T. Sol, Unbiased Investor: Reduce Financial Stress and Keep More of Your Money

“Traders and investors are humans, full of emotions, behavior biases, and good and bad past experiences. We don’t have much control over psychological shortcomings, and we routinely make decisions contaminated with our emotions and biases.”
― Naved Abdali

“People tend to weigh their most recent experiences more than the affairs of the past.”
― Naved Abdali

“With gambling or investing, if your gains are quick and easy, you will tend to keep the money in a separate mental account. So, if you subsequently lose it, you won't feel as upset as you'd think if you lost the money you brought to the casino. Yet, they are both pots of currency.”
― Coreen T. Sol, CFA

“Everyone who liquidates at the bottom of the market is quick to rationalize, ironically, that they decided to prevent further losses.”
― Coreen T. Sol, Unbiased Investor: Reduce Financial Stress and Keep More of Your Money

“Timing the market is a biased investor's game.”
― Coreen T. Sol, Unbiased Investor: Reduce Financial Stress and Keep More of Your Money

“The motives to sell during a market capitulation are rarely rooted in a long-term plan. If they were, the market would never be oversold.”
― Coreen T. Sol, Unbiased Investor: Reduce Financial Stress and Keep More of Your Money

“Timing an unforeseeable event is more likely a stroke of luck than skill.”
― Coreen T. Sol, Unbiased Investor: Reduce Financial Stress and Keep More of Your Money

“If you've convinced yourself that a market correction is likely (your belief) to justify holding cash rather than investing (your action), you may be under the influence of cognitive dissonance.”
― Coreen T. Sol, Unbiased Investor: Reduce Financial Stress and Keep More of Your Money

“It doesn't matter what you paid for an investment. If it no longer suits your objectives or has poor prospects, you should sell it.”
― Coreen T. Sol, Unbiased Investor: Reduce Financial Stress and Keep More of Your Money

“The motivation to break even is so tempting that you'll even consider doing so at greater levels of risk than you'd typically accept. If you've heard the expression "double or nothing," you've seen this bias in action.”
― Coreen T. Sol, Unbiased Investor: Reduce Financial Stress and Keep More of Your Money

“It is odd behaviour to ignore smaller denominations when transacting high values since large transactions provide the most obvious opportunity to keep more of your money.”
― Coreen T. Sol, Unbiased Investor: Reduce Financial Stress and Keep More of Your Money

“Familiarity bias drags you to the safety of your comfort zone and, in doing so, unwittingly increases your risks by limiting diversification and investment opportunities.”
― Coreen T. Sol, Unbiased Investor: Reduce Financial Stress and Keep More of Your Money

“Stocks aren't like a pair of shoes that go on sale but keep the same useful value. The value of stocks are based on their economic prospects, which change constantly.”
― Coreen T. Sol, Unbiased Investor: Reduce Financial Stress and Keep More of Your Money

“If you excuse investment concentration by telling yourself that your familiarity with domestic companies or specific sectors helps you understand those investments better, your familiarity bias is the excuse for your familiarity bias.”
― Coreen T. Sol, Unbiased Investor: Reduce Financial Stress and Keep More of Your Money

“Your investment choices are distorted through the voice of your experience, and the louder the narrative—the more recent or dramatic—the greater the influence it has over your “independent judgement.”
― Coreen T. Sol, Unbiased Investor: Reduce Financial Stress and Keep More of Your Money

“Short-cuts are timesavers for a reason: they omit details that can differentiate a profitable decision from one that you regret.”
― Coreen T. Sol, Unbiased Investor: Reduce Financial Stress and Keep More of Your Money

“Like streamers on top of a sailboat indicating wind pattern changes, when long-term rates are lower than short-term rates, it's a telltale that trends are likely changing.”
― Coreen T. Sol, CFA

“The Most Important Quality for an Investor is Temperament, not Intellect...
You Need a Temperament that Neither Derives Great Pleasure from Being with The Crowd or Against the Crowd.
-Warren Buffett”
― James Maendel, Factor Investing For Dummies

“The Most Important Quality for an Investor is Temperament, not Intellect...
You Need a Temperament that Neither Derives Great Pleasure from Being with The Crowd or Against the Crowd.

-Warren Buffett”
― James Maendel, Factor Investing For Dummies