Notes on Scary Markets From Your Sketch-Wielding Drill Sergeant
I want to talk to you about scary markets. For the sake of this particular subject, I want to be blunt and a little bit in your face. So for the next few minutes, please, just think of me less as...
Grads: How to Save Pennies Now and Retire Rich
Hey, grads. It’s never too soon to start planning and saving for your retirement (even if it seems far off). Larry Swedroe gives MarketWatch’s Robert Powell his thoughts on what college students and recent graduates can do now to avoid...
Three Ways to Think About “Is It Worth It?”
In life, there are certain nonnegotiables we simply must have. Think food, water and shelter for starters. Nobody will ask, “Is it worth it to eat?” It’s just something you do to stay alive. But deciding what to eat? That’s...
A Stock Tip That Went Horribly Wrong
Of all the misinformation disseminated to investors, the most pernicious supports the belief that some “investment pro” or pundit has the skill to reliably pick outperforming stocks. This myth is perpetuated by endless blogs and television appearances by “gurus” touting...
The Overconfidence Enemy in the Mirror
One of the questions I’m most often asked by reporters covering finance is: “What are the biggest risks facing investors?” My usual response is that the biggest risk confronting most investors is staring right back at them when they look...
The Influence of Recent Market Returns on the Risk Tolerance of Individual Investors (Part 2)
Last week, we examined a study that found investors’ risk tolerance fluctuates positively with recent market returns. This behavior is in direct conflict with rational economic theory, which dictates that when market returns become negative, wealth contracts and risk aversion...
The Influence of Recent Market Returns on the Risk Tolerance of Individual Investors
The recency effect—that the most recent observations have the largest impact on an individual’s memory and, consequently, on perception—is a well-documented cognitive bias. This bias could impact investment behavior if individuals focus only on the most recent returns and project...
CAPE 10 Ratio In Need Of Context
The Shiller cyclically adjusted (for inflation) price-to-earnings ratio—referred to as the CAPE 10 because it averages the last 10 years’ earnings and adjusts them for inflation—is a metric used by many to determine whether the market is undervalued, fairly valued...
Choose Experiences Over Stuff, and Maybe Over Security Too
You’ve heard of the American dream, right? The American dream was this machine we built to get rid of uncertainty and create security. It’s the white picket fence, the job and the minivan. You watch Dan Rather and a sitcom....
The Paradox of Finding Motivation Through Fear
I was driving with a friend recently and telling him about some projects that really excited me. I mentioned a new book I’m working on, an article I’m writing and this new hobby of adventure motorcycling in the desert. He...
