Irrational Investor Thoughts Hit Me….and I Recover

My mammalian brain is not immune to the foibles of bad financial thinking.

But thankfully I have the experience to catch myself making thinking errors, which happened today over a restaurant stock.

My kids love Buffalo Wild Wings. My wife despises it. I love to take the kids there when she isn’t around.

It always seems to be packed. I am sure they have fat operating margins. You see new branches popping up all over the place.

I was going to ...

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Dangerous Knowledge

When I browse the financial media, it makes me extremely grateful for my experience in the investment industry. It helps me to separate the good information from the bad.

Here is a particularly dangerous article, masquerading as solid wisdom. Without a lot more experience and knowledge it would be easy to read an article like this and take it to be truth.

http://finance.yahoo.com/news/cramer-many-stocks-too-many-222302476.html

The article basically says to hold about 10 “quality” ...

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Don’t Sink the Ship with an Anchoring Bias

Are you anchored to a certain price where you will sell (or buy) an investment? Welcome to the anchoring bias – a good way to torpedo your long term investment returns.

Anchoring bias is a behavioral finance term, much like mental accounting, which I wrote about earlier. It describes a specific type of irrational investor behavior.

How it works

Anchoring bias happens all the time. Here is an example:

You ...

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Mental Accounting for a Generational Mindset

The term “mental accounting” describes a specific type of irrational investor behavior. It’s an irrational attitude investors can take when separating their money for investment. But I think a little “mental accounting” can actually be beneficial for families that are investing for generations. Let me tell you why.

Money mind games

How is mental accounting irrational? Let’s assume an investor saved $100,000 from years of hard work, then got $50,000 as a surprise bonus from their job, and then won ...

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