Salient to Investors:

Barry Ritholtz cites his trading mistakes early in his career:

  • Optimism Bias. After the costs incurred, expenses, taxes paid, time and labor invested, most of the time, it is not worth the effort to beat the market. Most traders won’t go on to become Paul Tudor Jones or Jim Simons.
  • Confirmation Bias. When we are long, we tend to read bullish research and commentary. When we are in cash or short, we seek out bearish writings. Smart Money seeks out research and commentary that challenges its existing beliefs.
  • Recency Effect. People tend to focus on what just occurred, often to the detriment of the bigger picture or the longer-term trend. Post-Crash Stress Disorder is why many investors have been carrying so much cash during a 150 percent rally – they are waiting for the next crash, having missed the last one.
  • Politicians of either side get their perceptions and predictions wrong, so ignore them.
  • Cherished Myths unsupported by evidence. For example the Death Cross, Sell in May, Buying single-digit P/E stocks.
  • Blind Faith. Research anything you read, and study the long-term track record, the methodology involved, and the overall approach.  The National Retail Federation Black Friday survey is nonsense and has been wildly wrong for the 10th consecutive year.

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