The Emotional life-cycle of Investment is an interesting observation. Some of you may have heard or seen this chart before. Essentially it tracks the behavioral aspect of Investment. According to this chart, psychology affects our decision making process.
To the pure value investors, the view is Psychology detracts from performance as our human bias affects our decision making process negatively. Therefore, they advocate a cold, analytical approach. Famous value investors include Charlie Munger and Warren Buffet.
On the other hand, technicians and traders often take psychology into their decision making process. The key difference here is: Technicians (and Traders) believe they can outsmart others, by understanding the psychology that is prevalent in the financial market place.
Whilst it is unclear which approach is universally better, the availability of the two sometimes contrasting approaches, make the markets interesting. For me, I try and mesh the 2 approaches together. If nothing else, it makes interesting conversation piece. Happy reading.
2 comments:
What's your take on financial astrological forecasting?
Regards,
Jyh Ren
Astrological forecasting suggested a bleak HK outlook when the sun got "eaten"... guess what? we are now 1600 points higher.... the only other thing that got "eaten" alive are bears like me....
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