Buehler Bowen
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Investment Psychology: How to become a Master of Investment Emotion?
With the ups and downs of the stock market, whether your heart is experiencing the change from great joy to greed, from great sorrow to fear, when to enter the market, whether to wander in the loss of meat to leave? Do you make investment decisions rationally, or do you follow human intuition? Today we are going to discuss the psychology of investing and learn how to manage emotions together. The Tao of Warren Buffett says that of all human behavior, the relationship between people and money is perhaps the most special, especially when it comes to the stock market, which by definition is all traders, collectively, and is literally pushed around by psychological forces. In the modern investment theory, psychology does not have a special important position, the traditional view of investors psychological barriers not investors to make the right decision, according to the effective market theory, when the information is released, a large number of rational investors would immediately respond, make share price immediately adjust accordingly, stock price reaction is rapid, let no one can profit from it. But in recent years there has been evidence that "psychological and emotional factors influence financial decisions". People began to think about finance in terms of behavior, an approach that combined economics and psychology and was called behavioral finance. We understand the psychology of investing by deconstructing the Buffett approach. Widely regarded as the father of financial analysis, Graham explained stock market swings triggered by investor sentiment in two books, "Security Analysis" and "The Intelligent Investor." He argues that investors' worst enemy is not the stock market but themselves. An investor may be good at math, finance, accounting, etc., but if he can't control his emotions, he can't profit from investing. One of the three key tenets of Graham's approach, Buffett said, is to treat the stock market as a true investor. So what are the psychological and emotional factors that influence financial decisions? Let's list them briefly: overconfidence confidence in itself is not a bad thing, but overconfidence is something else. Overconfident investors not only make bad decisions on their own, but in combination have a huge impact on markets. Many investors overestimate their abilities and knowledge, affirm and rely on information they believe to be true and ignore contrary information, or evaluate readily available information rather than seek to understand information they know little about. Many investors and fund managers often have a sense of superiority, believing that they have better sources of information and know things that others don't, so they can beat others. This overconfidence can cause them to underperform. If all players do this, the result is hype. Research by Richard Taylor, one of the leading figures in behavioural finance, shows that people attach too much importance to random events and think they are catching up with new trends, especially when investors tend to look at the latest information and extrapolate from it. Behaviorists believe that people overreact to bad news and slow to react to good news, a phenomenon known as overreaction bias. If short-term reports are bad, for example, people will overreact quickly and without thinking, and share prices will inevitably suffer. Especially today, with the development of communications technology, investors can connect to the stock market 24 hours a day and check stock performance anytime and anywhere. So is it a good thing that investors ignore the whims of share prices? Taylor's take: "Invest in stocks and don't open the envelope." Loss aversion Loss aversion was first described 35 years ago by Nobel Prize winners Daniel Kahneman and Amos Tversky, Stanford University psychology professors. Before this, game theory and economic behavior of the author John von neumann and oskar morgenstern, according to "decision-making utility theory" put forward by people think everyone in their own best interests as the foundation, on this basis, choice, decision making, Numbers don't attach importance to the wealth, wealth is the value of incremental part is the profit and loss, they in math shows that for the same amount, People experience losses and gains differently, and losses are two times as painful as gains are two and a half times as pleasant. In a 50-50 game, even if the odds are equal, most people won't take a chance unless the potential gain is twice the potential loss. This is called asymmetric loss aversion, and the idea that falling is stronger than rising is one of the foundations of human psychology. Applied to the stock market, the effect of loss aversion on investors is obvious. We hold on to the wrong stocks for too long, vaguely hoping that one day we can wait for a turnaround and avoid facing our failures by not selling the stocks we are stuck with. But doing so actually creates another potential loss, and by not selling the wrong investment, you forgo another opportunity that could have been rearranged to make a profit. Mental Accounts "Mental Accounts" explores how our views on the future of money change as circumstances change. We tend to keep money in different "accounts" in our minds, and that determines how we view them. Here the author gives a simple example. Imagine that you must pay $20 for a nanny, you thought it was in the wallet, but couldn't find it, after open you took 20 dollars on the ATM to pay a babysitter, and then the next morning, the day before yesterday you suddenly found in his pocket that 20, you will think it's the 20 windfall, even if they come from your bank account, You've worked hard, but now that you have $20 in your hand, you don't feel any pressure to do anything you want. The concept of mental accounts explains why people are reluctant to sell their bad stocks, because in their minds, as long as they don't sell, paper losses are just paper losses, not actual losses, which helps us understand the problems of stocks. Risk tolerance, people are more willing to take risks. Short-sighted loss aversion Warren Buffett once said the best time for the stock market to open is one day of the year. In fact, it has to do with short-sighted loss aversion. When analyzing historical returns, it was found that major long-term gains occurred in only 7% of all months, i.e., in the remaining 93% months, there were no gains at all. In other words, the more times you look at the results, the more losses you see. If you look at the results once a day, you'll see half the losses, but if you look at the results once a month, the losses are much less traumatic. In other words, there are two factors that influence the storm of investor sentiment: loss aversion and valuation frequency. So, how often do you look for the best results? The answer is a year. Only when the observation period was one year did investors' affective utility factor become positive. Loss aversion is human nature and cannot be changed, but you can choose how often to check your net worth, at least in terms of the principles you set. The lemmings paradox is the consistency of investors, whether it makes sense or not. Lemmings are small rodents with high reproductive rates and low mortality rates. Every three or five years, lemmings make unexplained marches in the dark until they reach the sea and swim in the water until they die of exhaustion. Many people behave like lemmings when it comes to investing, including professional managers, who work in a system that evaluates results based on fixed criteria and have little incentive to make stupid, maverick decisions. But if you play by the rules, you'll fail. Going your own way is the only way to succeed. Emotional trap management buffett is the world's greatest investor, it is important to him overcome his myopic loss aversion, related to the structure of the company, Berkshire hathaway is a wholly owned subsidiary, also have some stock investment, so he can be observed that the value of the firm growth and the relationship between the two hold the price of the stock, do not need to watch stock every day, He doesn't need stock prices to justify his investment. Take Coca-Cola, for example. Coke's stock outperformed the broader market in the decade 1989-1998, but on an annual basis only six times in those decades. People who own Coke stock sell it when it underperforms the market, but Buffett first analyzes whether coke's fundamentals are still sound and then holds on. "Most of the time," Graham reminds us, "stock prices are not justified. They go to extremes because of the deep-rooted psychology of speculation or gambling that many people have, such as hope, fear and greed. People have to be prepared, not just intellectually, but psychologically and financially, for the stock market to go up or down." "When people are greedy or fearful, they often buy and sell stocks at stupid prices," Mr. Buffett said. In the short term, sentiment matters more to share prices than company fundamentals. Munger once said that when they graduated from school, they found a lot of irrationality in the real world. With the exception of Buffett and Munger, until recently the mainstream investment community has focused on the interaction between finance and psychology, the essence of investment decisions being human psychological processes.
By Buehler Bowen3 years ago in Psyche
Psychology: in fact, quietly attract a person, is about method
If a lot of things are too hard, too hasty, but will let the effect of the matter itself greatly reduced. For example, if we hold a handful of sand in our hand and we want to grab more, but when we close our hand, we find that the sand loses more. For example, we pour a glass of water in the hope that we will drink more when we hold it. Instead, we fill it to the brim and spill it when we make the slightest mistake. This shows that everything has its own development process, not overnight, nor overnight. We should not blindly pursue speed, but step by step. The same is true of love. We like a person, and when we want to get his or her attention, we act in an enthusiastic manner, only to be perceived as abrupt and unpretentious. So psychological research suggests that quietly attracting someone is the way. We need to study each other's likes and dislikes and in psychology, there's the Cole effect, which is a combination of psychological cues and self-cues. Through the study of cole effect, we can find that a person's best friend is in the same and similar state with them in terms of education level, economic condition, social value and so on. When we are with people we are familiar with or interested in, there is a sense of connection and we have many topics in common. And the feeling of mutual integration, mutual absorption and coexistence generated by common topics will make people appreciate themselves more, thus playing a positive reinforcing role. Therefore, this is why it is easier for similar people to form a group, because when people live in such a group, they tend to have a stronger sense of security and belonging. Therefore, if we want to further shorten the distance between two people, we need to strike while the iron is hot. We can study each other's hobbies, we can ask each other's friends, we can also study each other's circle of friends, know each other's interests, and then do corresponding measures. This makes it easier for us to let each other down by being similar. According to official data from an Image Institute in the US, the overall impression a person gives to others is divided into three main components: appearance, personal behavior and words and deeds. Appearance accounted for 55 percent of the study, posture accounted for 38 percent of the way people behaved, and just 7 percent of what they said to each other. That is to say, the first impression between people is particularly important, which will affect the follow-up of two people to a certain extent. The older you get, the more you realize you can judge a book by its cover. A person full of ritual sense, external also naturally clean and neat; A lazy person doesn't make an effort to look sloppy or sloppy. In great Wisdom, Mr Choi said: "The heart is born in the heart. There is no room for a dark heart. A good heart has grace." First impressions tend to judge a person's inner qualities in a short time. A good appearance is not only respect for oneself, but also respect for others. After all, no one in this world is obligated to get to know your interesting soul from a scruffy exterior. Keep your mystery. As the saying goes, you can only talk to someone for three minutes, but you can't throw a heart. If something has no mystery at all, it can be seen at a glance, then it will not have any hidden intellectual appeal and will immediately lose interest. From this point of view, once we have laid the foundation through appearance and proper manner, the next step is to maintain this attraction. The key to staying attractive is to be measured: don't tell your partner everything about yourself. Keep half and half. Don't give away all the information you have about yourself, but let others dig and explore it. British writer Thackeray said: "Sow action, reap habit; Sow habits, reap character; Sow character, reap destiny." After we retain a certain amount of mystery, the other person gradually increases the emotional and time cost to us because they want to get to know us better. Happiness does not fall from the sky, it is the compensation for your hard work, no one can just brilliant, unless it is just a beautiful dream. In other words, love is something we must strive to achieve. Therefore, we need to take reasonable and effective ways to push our love towards the desired direction. The other person will gradually increase our emotional and time costs because they want to get to know us better. Happiness does not fall from the sky, it is the compensation for your hard work, no one can just brilliant, unless it is just a beautiful dream. In other words, love is something we must strive to achieve. Therefore, we need to take reasonable and effective ways to push our love towards the desired direction. The other person will gradually increase our emotional and time costs because they want to get to know us better. Happiness does not fall from the sky, it is the compensation for your hard work, no one can just brilliant, unless it is just a beautiful dream. In other words, love is something we must strive to achieve. Therefore, we need to take reasonable and effective ways to push our love towards the desired direction.
By Buehler Bowen3 years ago in Humans
Psychology: Why are people more introverted, but often more powerful?
In fact, in today's society, people are willing to label those who are introverted, who like to be alone, who don't conform with the crowd with all kinds of negative labels of introversion, such as lonely, different, withdrawn, etc. In fact, psychology is divided into introverted personality and extroverted personality, these two personality is actually in the same position, there is no meaning of who is who is not. Many celebrities are introverts, including Audrey Hepburn, Mahatma Gandhi, Albert Einstein, LADY GAGA, Kim Kardashian, Ang Lee, Stephen Chow, and many more. Introverts, on the other hand, get their energy differently than extroverts. Extroverts are sociable and get all their energy from the outside, while introverts, on the other hand, get their energy from the inside through "self-reflection." Psychological studies show that introverts are sometimes better at certain things than others and are more likely to succeed. As Audrey Hepburn once said, the fact that she was alone from Saturday night to Monday morning speaks volumes about the need for quiet. Psychologists have found that if a person is able to think alone in an undisturbed environment, he is able to analyze problems more rationally and make exceptionally robust decisions. The best thing about him is that he is immune to outside influences. Compared to extroverts who socialize too much in busy environments, they are more likely to be influenced by other people or the environment, which can affect their judgment. As a result, introverts who prefer to be alone have a gift for thinking and making decisions that can make their minds sharper, more unique, and shine in different ways. At the same time, their inner reality is also very delicate, insight is very strong. Stephen Chow, our favorite comedian and director, is a typical introvert. Although his acting skills are exaggerated in movies and TV series, he is good at comedy but has no sense of humor, but in real life, he is not good at words and is ostracized by insiders due to his personality. But that didn't stop him from creating one classic after another with his comic gifts. Although his films are exaggerated, they have a unique charm beneath the details, and the audience will gradually resonate with them. When the classic "A Chinese Odyssey" was first released, no one could understand the mystery of it, but with the baptism of time, people gradually found something unique about the film, thus it received high praise among Chinese films. And then the autobiographical film "The King of Comedy", really the performance of his personality incisively and vividly. It is his personality that enables him to think independently and show his talent from a unique perspective. Later, when he became a director, he decided to take a different path and achieved remarkable results. Introverts tend to see through phenomena and like to analyze the truth behind events from an outsider's point of view, so they are better able to see through the inner nature of things. Extroverts, on the other hand, may only focus on external phenomena and easily ignore the nature of internal causes. As the saying goes, "Outsiders know a lot." Extroverts are like insiders. They are busy socializing and tend to get lost in events, whereas introverts are bystanders who can clearly see the nature of events. It's better than having a "God's perspective" that allows you to see things from a broader perspective. Of course, they choose their friends and tend to have higher-quality circles of friends. Comments: Introverts may be more than that. They may also have strong willpower, a sense of responsibility, a sense of mission and a strong sense of self-control. So they are not "loners" and "mavericks" in the popular perception. As long as they are recognized in their field and seize opportunities, they will have endless potential. Make a beautiful world in your own world! Of course, introverted people can not be too introverted, excessive introverted easy to cause inferiority, so in life and work, to maintain a good state of mind, the correct understanding of themselves, do not belittle themselves, do an introverted and not inferiority. A final word to all introverts: If we say extroverts are not successful, we are saying that they do not have the same talents as introverts. Keep a good state of mind, know yourself correctly, don't belittle yourself, do an introvert but not inferiority. A final word to all introverts: If we say extroverts are not successful, we are saying that they do not have the same talents as introverts. Keep a good state of mind, know yourself correctly, don't belittle yourself, do an introvert but not inferiority. A final word to all introverts: If we say extroverts are not successful, we are saying that they do not have the same talents as introverts.
By Buehler Bowen3 years ago in Psyche
