William J. Bernstein Article: Wild about Harry
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William J. Bernstein Article: Wild about Harry
You probably have see this: http://www.efficientfrontier.com/ef/0adhoc/harry.htm
What does he want to say? I couldn't figure it out. the graphs looks interesting, however. Your take?
What does he want to say? I couldn't figure it out. the graphs looks interesting, however. Your take?
Re: William J. Bernstein Article: Wild about Harry
I don't want to put words in Bill's mouth. But the basics of it is that the portfolio idea has worked, but being unconventional with tracking error it will be hard for many to follow when the stock market is going gangbusters. There will be a strong desire to abandon it when other approaches are doing much better in some years.hedgehog wrote: You probably have see this: http://www.efficientfrontier.com/ef/0adhoc/harry.htm
What does he want to say? I couldn't figure it out. the graphs looks interesting, however. Your take?
To which I tell him that most investors regardless of strategy do this anyway. So it's not unique to the Permanent Portfolio. We have met the enemy and it is us...
The above is why I think more investors should study behavioral finance and less time watching their portfolios constantly. When you understand how your brain interprets money decisions you can short-circuit the bad behaviors and become a better investor.
Last edited by craigr on Wed Jun 12, 2013 2:14 pm, edited 1 time in total.
Re: William J. Bernstein Article: Wild about Harry
Like the book - Your Money and Your Brain: How the New Science of Neuroeconomics Can Help Make You Rich by Jason Zweig - or do you have something better?craigr wrote: The above is why I think more investors should study behavioral finance and less time watching their portfolios constantly. When you understand how your brain interprets money decisions you can short-circuit the bad behaviors and become a better investor.
Re: William J. Bernstein Article: Wild about Harry
Aka, the "Oh how I hate to see no gain" thread...
Re: William J. Bernstein Article: Wild about Harry
Yes that would be a good book. Even just spending some time searching the web will show a lot of good papers and articles. A lot of what we think are good financial decisions are really just throwbacks to human evolution in terms of assessing risk, etc. Overconfidence, loss aversion, etc. are all hanging in our psyche ready to cause problems (and they do).hedgehog wrote:Like the book - Your Money and Your Brain: How the New Science of Neuroeconomics Can Help Make You Rich by Jason Zweig - or do you have something better?craigr wrote: The above is why I think more investors should study behavioral finance and less time watching their portfolios constantly. When you understand how your brain interprets money decisions you can short-circuit the bad behaviors and become a better investor.
Humans are wired to do certain things and think in particular ways. If you at least know what your brain subconsciously is wanting to do, and you know in a particular situation it is not a good choice, then you can make a rational decision to ignore it.
But if you don't know why your brain is making a particular decision, you have no way to know if it is or is not a good call.
Last edited by craigr on Wed Jun 12, 2013 3:55 pm, edited 1 time in total.
Re: William J. Bernstein Article: Wild about Harry
It's long one but in short can you tell how it is that all 4 of the PPs asset classes go down at the same time? I don't know but what's the correlation between them? when all 4 goes down what goes up?Dieter wrote: Aka, the "Oh how I hate to see no gain" thread...
Re: William J. Bernstein Article: Wild about Harry
Then perhaps you have more focused recommendations on the subject than a Google search? Something like an hour long lecture on YouTube or something in similar length would be nice. I tried to find a lecture by the author Jason Zweig but haven't found. Thanks.craigr wrote: Yes that would be a good book. Even just spending some time searching the web will show a lot of good papers and articles. A lot of what we think are good financial decisions are really just throwbacks to human evolution in terms of assessing risk, etc. Overconfidence, loss aversion, etc. are all hanging in our psyche ready to cause problems (and they do).
Re: William J. Bernstein Article: Wild about Harry
Behavioral Finance and Wealth Management: How to Build Optimal Portfolios That Account for Investor Biases by Michael Pompian is said to be a more practical book than Zweig's. Any experience with it? Still, i would prefer some shorter essay or lecture on the topic to begin with. This does not sound that interesting a topic to dive that deep into. Though certainly useful.
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Re: William J. Bernstein Article: Wild about Harry
In my opinion, behavioral finance is one of the most important areas of investing to familiarize yourself with. The challenge is then to listen to and adopt the research findings.hedgehog wrote: Behavioral Finance and Wealth Management: How to Build Optimal Portfolios That Account for Investor Biases by Michael Pompian is said to be a more practical book than Zweig's. Any experience with it? Still, i would prefer some shorter essay or lecture on the topic to begin with. This does not sound that interesting a topic to dive that deep into. Though certainly useful.
"The first principle is that you must not fool yourself and you are the easiest person to fool" --Feynman.
Re: William J. Bernstein Article: Wild about Harry
I don't know that book, but it sounds interesting.hedgehog wrote: Behavioral Finance and Wealth Management: How to Build Optimal Portfolios That Account for Investor Biases by Michael Pompian is said to be a more practical book than Zweig's. Any experience with it? Still, i would prefer some shorter essay or lecture on the topic to begin with. This does not sound that interesting a topic to dive that deep into. Though certainly useful.
Coming from the start-up world and raising venture capital has given me a much different perspective on issues like risk, overconfidence, loss aversion, confirmation biases, etc. than what I commonly see. I have been burned by all these behavioral issues to some degree and I try really hard to keep them in check as I've matured as an investor.
I use the Permanent Portfolio because based on my own life experiences, goals, and outlook on investing I find I am most comfortable with the diversification it offers. I say this knowing full well it is not perfect, it won't always have winning years, and may in fact have some surprises I hadn't considered. But compared to the alternatives I feel it offers the best balance of risks for me and my personality. So if that means I'm running against what the crowd thinks is popular at the moment, so be it. Most people are horrible investors so I don't care what they are bragging about in the market with their latest win. The odds are passive investors like me that don't tinker with things are going to beat them over time.
EDIT: I see many videos on YouTube on behavioral finance. I have not seen them, but some look like really good intros all the way to full blown college lectures.
Last edited by craigr on Wed Jun 12, 2013 10:53 pm, edited 1 time in total.
Re: William J. Bernstein Article: Wild about Harry
By full blown course you mean the Yale one I guess. Maybe I don't need that much and at that level but I have found a one hour show on PBS NOVA - Mind Over Money - http://video.pbs.org/video/1479100777/
Might be a good start. If you have a better idea in a one hour watching/reading time frame pls. post to this thread.
Might be a good start. If you have a better idea in a one hour watching/reading time frame pls. post to this thread.
Re: William J. Bernstein Article: Wild about Harry
Didn't read yet just post it here: http://www.investorsinsight.com/blogs/j ... dicts.aspx
Re: William J. Bernstein Article: Wild about Harry
Thank you for the links hedgehog!!
Re: William J. Bernstein Article: Wild about Harry
Although Warren Buffett's sidekick Charlie Munger has made some pretty stupid comments in recent years, his writings on what he calls (I think) "mental latticeworks" is really fascinating and arises from the whole behavioral finance field, probably before it was even called behavioral finance.
As you read how Munger describes the way an investor can straighten out his thinking, it gives you a lot of insight into the mental configuration of great investors and speculators. It's different than the way most people are wired.
Munger is a quite brilliant man. I just think he is sort of old and grumpy now and doesn't care what anyone thinks about him.
As you read how Munger describes the way an investor can straighten out his thinking, it gives you a lot of insight into the mental configuration of great investors and speculators. It's different than the way most people are wired.
Munger is a quite brilliant man. I just think he is sort of old and grumpy now and doesn't care what anyone thinks about him.
Q: “Do you have funny shaped balloons?”
A: “Not unless round is funny.”
A: “Not unless round is funny.”
Re: William J. Bernstein Article: Wild about Harry
Could you post some links? As I was only able to find posts written on him. Not by him. I guess that would make a difference.MediumTex wrote: Although Warren Buffett's sidekick Charlie Munger has made some pretty stupid comments in recent years, his writings on what he calls (I think) "mental latticeworks" is really fascinating and arises from the whole behavioral finance field, probably before it was even called behavioral finance.
Re: William J. Bernstein Article: Wild about Harry
Just don't read that part of the book about the dope that invested a lot of cash in CMGI and road it all the way up (huge profit) and then almost all the way down. Oops...that was me.
For some reason jason was fascinated by my story. I for one, wanted to forget the whole thing. Oh well...at least it is in print and I will not be able to forget that investing mistake anytime soon.
For some reason jason was fascinated by my story. I for one, wanted to forget the whole thing. Oh well...at least it is in print and I will not be able to forget that investing mistake anytime soon.
hedgehog wrote:Like the book - Your Money and Your Brain: How the New Science of Neuroeconomics Can Help Make You Rich by Jason Zweig - or do you have something better?craigr wrote: The above is why I think more investors should study behavioral finance and less time watching their portfolios constantly. When you understand how your brain interprets money decisions you can short-circuit the bad behaviors and become a better investor.
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Re: William J. Bernstein Article: Wild about Harry
I think William Bernstein wrote an interesting review for the new book in which he expressed a guarded acknowledgment that the PP works, coupled with serious doubts that many people will be able to stick with it over time. This earlier essay would seem to reflect the same line of thinking. For the record I think he is partly right. The PP really does require some major mental adjustments that a lot of people will not be able to handle.
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Re: William J. Bernstein Article: Wild about Harry
This one will keep you busy for a while:hedgehog wrote:Could you post some links? As I was only able to find posts written on him. Not by him. I guess that would make a difference.MediumTex wrote: Although Warren Buffett's sidekick Charlie Munger has made some pretty stupid comments in recent years, his writings on what he calls (I think) "mental latticeworks" is really fascinating and arises from the whole behavioral finance field, probably before it was even called behavioral finance.
http://law.indiana.edu/instruction/prof ... c/16_1.pdf
Q: “Do you have funny shaped balloons?”
A: “Not unless round is funny.”
A: “Not unless round is funny.”
Re: William J. Bernstein Article: Wild about Harry
The same thing in more easily read or audible format: arunbansal.com/charlie-munger/charlie-munger-psychology-human-misjudgment.htmMediumTex wrote: This one will keep you busy for a while:
http://law.indiana.edu/instruction/prof ... c/16_1.pdf
75 minutes, exactly.
Btw. can we know which book you posted the excerpt from?
Re: William J. Bernstein Article: Wild about Harry
Another one:
https://dimensional.adobeconnect.com/_a ... lications/
But hey, they want to sell us on something - so is it legit?
https://dimensional.adobeconnect.com/_a ... lications/
But hey, they want to sell us on something - so is it legit?
Re: William J. Bernstein Article: Wild about Harry
I don't know where that came from. It just popped up on a Google search. I remember reading it a few years ago.hedgehog wrote: Btw. can we know which book you posted the excerpt from?
Q: “Do you have funny shaped balloons?”
A: “Not unless round is funny.”
A: “Not unless round is funny.”