Friday, February 17, 2012

Emotions: 5 - Hubris

This is the next part in my series on how emotions can damage our investing and trading portfolios...

EDIT: At the time this blog entry was posted I had a Youtube video here. That has been removed but I want the rest of my content to be remain. Nothing hidden no past mistakes ignored. All out in the open.

Hubris is one of the main reasons I do not care for professional money managers. They get control of vast amounts of other people's wealth and think too much of themselves. How many times do the financial TV shows trot out some big shot fund manager and ask them, "What should the average investor do?" They then give everyone advice without knowing anything about our goals and needs. What was the reason for that guest speaker being on the show? They made a lot of money. How they did it isn't important if its safely, riskily, slowly.
Several months or perhaps a year later we see a report on how they blew up their fund because they couldn't admit they were wrong and walk away from a bad investment. But that's ok because they are old news and the show's host has a new fund manager to give us advice.

I suppose in their defense, money management is one of the few industries where people directly question them. You wouldn't go to your doctor and he gives you an X-Ray and you question and disagree with the prognosis. As an honest fund manager trying to do whats best it would get annoying having your clients question everything and why you aren't making as much profit as last nights guest speaker on TV.

On the other hand, money management isn't brain surgery. You do not have to get a doctorate before successfully handling money. In fact I would dare say that it has as much to do with emotional discipline as it does with using a great strategy.

By identifying what are the common big reasons why people lose money investing and trading, we can focus on removing those reasons. Everything that is less are the small reasons for failure plus the small and big reasons for success. Experience can be gained in investing and trading. Humility and admitting your weaknesses is harder to learn.

Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others. I am not a financial planner, financial advisor, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

1 comment:

  1. Good lord did I hate those sort of questions.

    Certifications, diplomas and degrees. If I had a nickel for every person with certifications, diplomas and degrees (In finance no less) who ended up asking me many questions on how to trade ... I wouldn't need to trade.