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Solid IU interview with Heavy Hitters
Old 06-18-2008, 02:23 PM   #1
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Solid IU interview with Heavy Hitters

Pretty good piece on Behavioral Finance (BF) and Indexing. I can not seem to get enough info about BF, but combining it with indexing is sweet indeed. Here is what Dr. Bernstein has to add to the subject...

Quote:
JoI: If indexing is proven to provide the best odds for long-term success, why don't more investors index?
Bernstein: See my answers to the second question. The real mystery is just why both professionals and small investors think that asset management—active or passive—is so easy. No one in his right mind would walk into the cockpit of an airplane and try to fly it, or into an operating theater and open a belly. And yet they think nothing of managing their retirement assets. I've done all three, and I'm here to tell you that managing money is, in its most critical aspects (the quota of emotional discipline and quantitative ability required) even more demanding than the first two. I think that the reason for this is that unlike flying or surgery, investing seems easy—tap a few keystrokes, and hey presto, instant portfolio. It's almost as easy as turning on a chainsaw, but far more dangerous.
Behavioral Finance And Indexing -
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Old 06-18-2008, 03:40 PM   #2
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Dr. B always makes me laugh:

Quote:
Overconfidence: Most investors don't realize that the fellow on the other side of their trade most likely has the name Goldman Sachs or Warren Buffett on it. It's like playing tennis against an invisible opponent. Unfortunately, more times than not, it's the Williams sisters.
Quote:
JoI: Is behavioral finance being used to justify poor investment decisions and a lack of education?
Bernstein: No, I don't worry about that. It is being misused as a marketing gimmick by unscrupulous money managers, if you'll allow me to use a redundant modified noun.
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I've Only got Nine Toes
Old 06-18-2008, 03:56 PM   #3
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I've Only got Nine Toes

Hey, I operate a chainsaw pretty well...

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Old 06-18-2008, 05:31 PM   #4
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Originally Posted by ats5g View Post
Dr. B always makes me laugh:
Me too. He is the self appointed good cop. All the other people selling investment products or advice are dangerous charlatans. Only the good doctor is trustworthy. (After all, as he reminds us here, he has opened bellies and flown airplanes.)

Not only is his pose obnoxious and demanding of a high level of naïveté on the part of the reader, his assertions are ludicrous. With millions of small investors in the market, if I trade a couple thousand shares I am most likely trading against Goldman? Sure, Dr. Bill.

The other thing he doesn't mention is time horizon. I doubt if a typically small investor would ever match Goldman’s time horizon. So if they manage to scalp a ¼ point from the little guy, who cares?

Ha
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You're brave.
Old 06-18-2008, 07:43 PM   #5
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You're brave.

Ha,

I admire your continued willingness to go against the party line in discussing your investment viewpoints. For some, investing following the tenets of Mr. Bernstein works really well. Others have different opinions. He's a really smart guy. And there are a number of other smart guys and gals in his line of work who also get my attention when they discuss markets and economics. There's room for everyone.

Tom
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Old 06-18-2008, 11:19 PM   #6
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Originally Posted by tomintucson View Post
For some, investing following the tenets of Mr. Bernstein works really well. Others have different opinions. He's a really smart guy. And there are a number of other smart guys and gals in his line of work who also get my attention when they discuss markets and economics. There's room for everyone.

Tom
Exactly what I was trying to say. I think Bernstein is obviously well informed. I was just ragging on his self promotion. All these peope are salesmen. I just have a thing about holier than thou salesmen.

Ha
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