I Love Being Obsolete
A while ago I discovered these guys and almost immediately gave them a large hunk of my portfolio and essentially retired from worrying [and writing] about the stock market [they are up 100% in the past 3 years, with only a moderate amount of risk and a MER of 0%!]. Then today while thumbing through this month’s MoneySense magazine [Canadian content eh!] I find a story about The Market Guy:
“This is a personable blog with a sense of humor. It is focused on income trusts and authored by an instructor with the psychology department of Carleton University with a specialization in behavioral finance. Market Guy says in his teenage years he looked like junior capitalist Alex P. Keaton (played by Michael J. Fox) in the TV sitcom Family Ties. Now he just looks like a grown-up nerd, he reports.”
The Market Guy writes about the psychology of money [one of my fav topics] and since he has a great education and tons of experience [he had pulled over $400k out of the market by age 35] he’s a lot more qualified, and possibly more entertaining than I am, to write about it…
In mainstream economics, there is an assumption that people are rational economic decision-makers. Therefore, the focus is on what people should do. Psychology believes that people arenâ€™t always rational and a focus is placed on what they actually do. Economists often dislike psychology, believing itâ€™s about penis envy and reading minds. Psychologists often dislike economists, figuring that human activity is far too complex to be reduced to a series of mathematical equations and normative predictions.
Whatâ€™s the punch line? Researchers in behavioural finance believe that psychological phenomena pervade the world of finance. They use models of human behaviour to understand financial decision-making. Questions that are of interest to such a researcher might include: Why do so many investors buy high and sell low? Why will so many people travel across town to save $5 on a tank of gas, but wonâ€™t drive across town to save $25 on a fridge? Why do people hold on to stocks that have gone way beyond their targets? Why do people focus so much on where a stock used to trade? You get the idea.
So that’s investing and the psychology of money crossed off of my list of topics. How liberating…check out the Market Guy and his family members Market Gal and Market Dad…meanwhile I’m off to see if I can find a fabulous Rich Dad blog.