Archive for the ‘Behavioral Finance’ Category

Investing And Life Are More Like Poker Than Chess

“Success is nothing more than a few simple disciplines, practiced every day.” – Jim Rohn Investing and life are more like poker than chess. I recently listened to an interview with Annie Duke. Ms. Duke’s book, Thinking in Bets along with the interview really resonate with me because her thinking is quite similar to mine. In this quick video, I detail the parallels of investing and poker and why it is critical to keep a “poker face,” keeping your emotional composure during bad….and even good investment periods! About Thinking in Bets: Making Smarter Decisions When You Don’t Have All the ... Read More

Don’t Get Trumped in 2017

In my video this quarter (you have watched it, right?), I mention the long term nature of investing in stocks and bonds, with the presidency a relatively short term event. Don’t fall into the trap of thinking all positives or all negatives because your party (or the other party) is in power. We give too much blame and credit to the President, and when prudent investors have a long time horizon, it is better to stick to the strategy appropriate for you and your risk level, and don’t get emotional. HERE’S A GOOD BLOG TALKING ABOUT THIS IN MORE DETAIL Read More

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Investors Often Mistake Emotion for Gut Instinct

In May I was in New York City, and the highlight by far was the interview I did with Financial Advisor IQ (division of Financial Times) on biases. It was really fun, and focused on the types of emotions and biases that investors have to be aware of and overcome. The producer liked the interview so much that he decided to make it a 3 part series, so the link below is only for the 1st of 3. The rest came out in July and August, so I’ll link to that in a subsequent newsletter. Anyway, pretty good interview, so ... Read More

Investors Often Mistake Emotion for Gut Instinct

In May I was in New York City, and the highlight by far was the interview I did with Financial Advisor IQ (division of Financial Times) on biases. It was really fun, and focused on the types of emotions and biases that investors have to be aware of and overcome. The producer liked the interview so much that he decided to make it a 3 part series, so the link below is only for the 1st of 3. The rest will come out sometime in July and August. Anyway, pretty good interview, so I hope you watch it. Investors Often ... Read More

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Three Types of Financial Forecasters

Every investor is a forecaster to some degree, even if you don’t admit it. But what kind are you? 1.  The Foolish Forecaster 2.  The Oblivious Forecaster 3.  The Probabilistic Forecaster I know which kind I am (hint:  it’s not 1 or 2). Click for the full article describing each type Three Types of Financial Forecasters Read More

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How to Avoid the Problem of Short-Termism

As a follow up to my video above, I like the article below because it talks about the tendency to judge financial markets in periods that are so short that it results in higher fees, higher taxes, and lower average performance. With the 24 hour news cycle, news alerts, etc., we are constantly bombarded with information, and the true professional learns what to listen to and not. Click here for the full article Read More

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U.S. Stocks were positive 73% of the time

With an unmanaged stock market index going back to 1926, 73% of the time U.S. Stocks were positive. When you add in the “slightly negative” column of declines from 0 to 10%, that adds up to about 87% positive or slightly negative. The future could absolutely be different, and you have to ensure it fits with your individual goals. Read More

Do You Have an Investor or Trader Mindset

The last month has been interesting to say the least.  This is a wonderful time to ask yourself Are you an Investor or a Trader? The mindsets are completely different, leading to different behaviors, and different outcomes. I ask this question in my video this month, talk about the differences, and let you decide by the end which of the two you are. So, what do you think?  Are you an Investor or a Trader? Click on the video Transcript: Hi there.  Mike Brady with Generosity Wealth Management, a comprehensive, full service financial firm here in Boulder, Colorado. Today I’m ... Read More

U.S. Stocks were positive 73% of the Time

With an unmanaged stock market index going back to 1926, 73% of the time U.S. Stocks were positive. When you add in the “slightly negative” column of declines from 0 to 10%, that adds up to about 87% positive or slightly negative. The future could absolutely be different, and you have to ensure it fits with your individual goals. Read More

Investments are a Journey

“Every journey in life has a destination.” — Ken Poirot In today’s video, I share a conversation I had with a friend of mine, who is a surgeon.  How does he handle things when the surgery outcome is unknown, and in the middle of the operation if things go awry?  How do you stay calm? What he deals with on a daily basis is the same as investments and your financial plan.  How do we keep our eyes on the big picture?  What is normal, and how do we stay calm? One of the benefits I bring to my relationship ... Read More

The Most Bullish Chart has a Stock Market Crash in the Middle of It

It is normal for there to be corrections with a generally bullish market, which we’ve been in for 6 years now and I believe will continue. The chart above does NOT mean our RED line will continue, as it could be the end of the bullish trend.  I don’t think so, but it’s possible.  I’ve made the argument many many times why I’ve come to my conclusion (see previous newsletters and videos going back 2 to 3 years). We have 4 months left in the year, but more importantly, if you’re invested in the stock market in any way, you ... Read More

Time Horizon, Plan, Conviction

“I never said it’d be easy-I only said it’d be worth it”–Mae West. That’s what I think about when I think about investments. Yes, the unmanaged stock market indexes are making the news, but the whole reason we have a plan, discuss the time horizon, and determine our conviction is because these events happen. Always have, and always will. History has shown us that those who ignore and then over-react are the ones most hurt. I don’t do that, and I wouldn’t want any of my readers to do that either. For my full thoughts, click below for the video. ... Read More

The Cost of Getting Scared Out of Stocks in 1998

Emerging Markets cratered 40%.  Commodities fell over 25%.  The dollar rallied over 20%.  Asia looked like it was falling apart.  The US Stock Market fell 18%. I’m not taking about now, I’m talking about 1998.  Right before the US had the best GDP growth rate of the recovery. Things that appear so obvious are not always so. The Cost of Getting Scared Out of Stocks in 1998 Read More

Radio Interview with Dr. Jason Carthen

I was recently asked to be on an hour long radio show / podcost talking about ethics in the workplace. It was titled “Navigating the Demands of Business and Remaining True to Yourself”. It was lot of fun, and the host was really engaged and enthusiastic.  While he and I talk about the demands of business and how being ethical is so important, I share my life story with him, which many of you know.  I am pretty open with him (as I am with everyone who is interested), sharing the ups and downs of my personal and business life. ... Read More

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Never Invest in Something You Cannot Understand

Warren Buffett “Never Invest in a Business You Cannot Understand” Good advice. I’m going to take it one step further and say “something” or “anything”. I think Wall Street has created a lot of very creative financial products out there, and some of them are good while others are bad.  Mostly it depends on which “tool” you need to meet your individual goals. That being said, just because something is complicated doesn’t mean it’s better, and you should definitely understand it before investing in it. That’s one of the jobs of your financial adviser, to help explain each investment you ... Read More

7 Simple Things Most Investors Don’t Do

      I’m entering my 24th year working with clients. I did financial plans for people decades ago, and usually, those that did reach their goals did so not because they bought mutual fund A instead of mutual fund B, or this investment over another, it  had to do with having the right behavior and keeping the big questions in mind. Ben Carlson wrote an absolutely wonderful blog that I’ve linked to below.  He says very succinctly what I say all the time, and truly believe. Here’s his list of 7 Simple Things Most Investors Don’t Do Look at ... Read More

Current Market Conditions

As volatility has increased in the past 3 weeks, I want to keep you well informed of my thoughts. Are the past weeks normal, have the fundamentals changed, or is this the canary in the coal mine we’ve been waiting for? These questions are answered in my video. Hi, Mike Brady here with Generosity Wealth Management, a comprehensive, full service wealth management firm, headquartered right here in Boulder, Colorado. I last spoke to you a couple of weeks ago and at that time, I talked about the third quarter. I said it’s been a tough quarter, very volatile and it ... Read More

What Are the Odds We’re Heading for Another Crash

            The magnitude of loss greater than 20% or 30% is actually quite unusual, but 10% happens often, even if it hasn’t happened since 2011. When it happens it doesn’t feel very good, but it’s not necessarily a prelude to bigger declines, so we shouldn’t jump to that conclusion. Here’s a full article with more discussion about the odds.   What Are the Odds We’re Heading for Another Crash Read More

When Exotic Devices Create Exotic Problems

I love the below article, and recommend you read it. Essentially it talks about the limits of complexity, and how exotic devices can create exotic problems. The reason this is relevant is the applicability of this principal to finance. Any financial model is only as good as the person or team using it Complex strategies can create unforeseen complications Some problems have no solution, so you have to choose which form of risk you want to deal with, risk now or risk in the future. etc. Really good article and I agree with all his points. When Exotic Devices Create ... Read More

Investing in Previous Year Winners

One thing to watch out for is assuming the future will reflect the past. As a matter of fact, that whole “past performance is no guarantee of future result” is actually true. So, looking at history over the past 14 to 15 years, what would happen with your returns and volatility if you had invested for the year based on the best asset class for the prior year? Inquiring minds want to know. Therefore, you should watch my video. Hi there, Mike Brady with Generosity Wealth Management, a comprehensive full service wealth management firm headquartered right here in Boulder, Colorado. ... Read More

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The Dow Jones Industrial Average is an unmanaged, price-weighted index of 30 large capitalization stocks with dividends reinvested.

The Standard & Poor’s 500 Index (“S&P 500”) is an unmanaged, market capitalization weighted index of 500 widely held stocks, with dividends reinvested, and is often used as a proxy for the stock market.

The Nasdaq Composite is an unmanaged, market capitalization weighted index of stocks listed on the Nasdaq Stock Exchange, and are reported as price return without reinvestment of dividends.

Indexes are often used as a proxy for the stock market and cannot be invested in directly.