THE BEHAVIORAL INVESTOR (BY DANIEL CROSBY)
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- เผยแพร่เมื่อ 23 พ.ค. 2024
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This is an animated video summary of the most important takeaways from Daniel Crosby’s The Behavioral Investor, a 2018 book taking a modern approach behavioral investing.
Learn how to pick your first stocks: bit.ly/37xT2JR
Top 5 takeaways:
00:00 Intro
00:27 1. 4 Behavioral Risks Crushing Your Investment Returns
04:02 2. How to Manage the 4 Behavioral Risks
09:05 3. How to Design a Winning Rule-Based System
11:26 4. Why Value Investing Works
13:17 5. Why Momentum Investing Works
TL;DW:
- To become a great investor, you must learn to suppress your ego, avoid conservatism in your stock pickings, paying more attention to numbers than stories and that no good investments are made under powerful emotional influence
- Cope with ego by spreading your money across at least a few different stocks, conservatism by flipping the script and asking, “why not?”, instead of “why?”, attention by playing the odds and emotions by automating and learning to recognize your emotions.
- A winning rule-based stock picking system should have empirical support, theoretical support and (some) psychological pain attached to it
- Value investing a la Warren Buffett and Benjamin Graham fulfills these criteria
- Momentum investing also fulfills all of the criteria for a winning rule-based stock picking system
My goal with this channel is to help you make more money and improve your personal finances. How to become a millionaire? There are many ways to get there - investing in the stock market, becoming a stock trader, doing real estate investing, or why not becoming an entrepreneur? But whether you are interested in how to invest in stocks or investing strategies for creating passive income with rental properties - I hope to be able to provide you with a solution (or at least an idea) here. Warren Buffett - the greatest investor of our time - says that you should fill your mind with competing ideas and then see what makes sense to you. This channel is about filling your mind with those ideas. And in the process - upgrading your money-making toolbox.
Learn how to pick your first stocks: bit.ly/37xT2JR
Stock B ?
@@kirubasuthan It might seem so, on first glance. Don't forget to take into account the size of the outcomes though. Stock B is more likely to have a positive payoff, but that positive payoff is not nearly as big as the one from stock A. Stock A is like betting on the underdog in a sports event. The payoff, if you win, is enormous. We can calculate the expected outcome of the two stocks in the following way: A: 90%*-10%+10%*300%=-9%+30%=21%, B: 10%*-10%+90%*20%=-1%+18%=17%. So the expected outcome of stock A is 4% higher than for stock B (21%-17%). This would indicate that stock A is better. Of course, this is only true if size your bets properly. If you invest 100% of your capital every time, you won't be able to reap the long-term benefit of the occasional huge payoffs of stock A.
Love that ❤️
Can u make a consolidated video on stock principal and analysis that u learnt from reading these books
@@TheSwedishInvestor pppppppppppppppppppppp
I am amazed how videos with titles such as" top 10 stocks to buy" has got much more views than real content like this. Smh.
I'm glad that there are people like you who appreciate this over the "top 10 stocks to buy" videos Vismay Patel! The top 10 watchers will realize too late that there are no easy money to make following the heard in markets. It sells though, unfortunately.
The Swedish Investor so whats ur top 10 stocks to buy?
@@TheSwedishInvestor this response makes me feel like you've read, "How to Win Friends and Influence People" 🤷🏼♂️
Financial illiteracy is more than common than herpes awareness
A little on behavour 1 - Ego: We tend to overestimate our strengths - Dunning Kruger effect. Additionally, ego forces us to seek out information that affirms our thoughts - Cognitive bias. Once we have two conflicting thoughts the ego will protect itself and go with the bias one - Cognitive dissonance, which we then blame on the markets. The inverse would also but detrimental - The imposter syndrome: where you lack action due to events outside your expertise.
Stock question: Depends how risk averse you are. Both stocks have a positive expected value, but B is better for the risk averse, where as stock A is better if you are risk neutral.
Expected value A: 0,9 * -10 % + 0,1 * 300% = -9% + 30% = 21 %
Expected value B: 0,1 * -10 % + 0,9 * 20 % = -1% + 18 % = 17 %
Thanks for great content btw, keep it up! :)
Geometric mean A: e^(0.9 * ln(0.9) + 0.1 * ln(3)) = 1.015 times
Geometric mean B: e^(0.1 * ln(0.9) + 0.9 * ln(1.2)) = 1.1659 times
Option B is significantly better. The difference between your method and my method is explained here: th-cam.com/users/live1f5wtWFLGKs?feature=share&t=1735
The question was really interesting and I've discussed it with some friends as well (10$ for each bet)
Stock A
9x return 9 USD instead 10 USDinit bet (81 USD) (losing 10%, 90% of the time)
+ 1x lucky strike return 40 USD (wining 300%, 10% of the time )
Total bet on A 100 USD total won 121, Return 21% !! 12 USD * 9x = 108 USD
Total bet on A 100 USD total won 117, return 17% !!
At the same time risk reword
Stock A 9 : 30
Stock B 1: 18
Hi, This is Sun Chew, the editor of Business Today Magazine Publisher from Taiwan. We are going to publish the complex Chinese version of THE BEHAVIORAL INVESTOR in Taiwan.
I am very excited to see this video. You really made it very interesting and we love it very much!!!
Therefore, I would like to ask if you are willing to authorize us to use this video in Taiwan after attaching Chinese subtitles?
I'm stunned, I appreciate it a lot! 😁 You can add subtitles to this video here on TH-cam (Chinese - Taiwan). You do it by submitting it as a contribution (support.google.com/youtube/answer/6054623?hl=en ). After that, you can embed or share the video by using TH-cam's build-in functions on your own website. Cheers 👍
Man, do I love your sense of humour in those videos (of course beside them being useful) I laughed quite a few times on this one. Thank you.
If you can survive long enough to "learn" the market.... You'll open a door that most people only dream of seeing
One fast way to learn the market is to learn from people already performing at a high level for decades like warren buffett.
Loving the great videos and book recommendations that come with. Thanks!
These are really nice videos, keep up the good work. I personally find it hard keeping my emotions out of my trades!
Thank you Umar! Glad to hear that you find the video informative. Also, welcome to the channel! 😀
if you find it hard to keep your emotions out of your trades I suggest you to keep a journal where you record on how you felt and action you took in every trade. This is going to help you to increase your self-awareness and therefore help you to make better trades.
thanks for the summaries. well done
According to kelly criterion, one should invest 7% of one's portfolio into stock A and 85% into stock B
Personally I liked 1. "4 Behavioral Risks Crushing Your Investment Returns", 2. "How to Manage the 4 Behavioral Risks" and 3. "How to Design a Winning Rule-Based System". I felt #4 deviated from Behavior and focused on the Buffett approach. Your 3 Part written summary under "Show More" is awesome and overwhelming. Will you do a review of Crosby's "The Laws of Wealth"?
Thanks TSI.
Cool stuff, great video. Keep it up.
Thank you Mark! I like the abbreviation, might steal that one for future videos ... 😎
Thank you, Swedish Investor :) This is very helpful.
You're welcome! Thank you for your support! 😀
Hello, BRAVO !, i start to watch your channel 3 days ago and 12 videos..., very good work,
i join Vismay Patel, this video ( i will buy the book, the first in english of my life :) ) is very interesting, i like the empirical and theorical support and pain :) !!! this is why this is works the PAIN !
and only 72 000 views !!!!
have a nice day and to be continued thanks a lot
Really interesting! And thanks again for sharing this. This book seems like a summary of other books. It has many ideas from the book by Dani Kahneman.
Thank you. Indeed it is! So this is all an inception of summaries 😉
I loved learning about bearings bank in my risk management course. I really enjoy looking at investor behaviour and analysing risky behaviour traits. What career paths should I look into?
Very nice video. Thank you.
This is a book I wanna read
Just Subscribed now. Awesome work dear
Awesome to hear it! 🙌
I think that the 5th point is more speculative, and it refers to *trading* more than *investing*
But still it is my opinion
I am from india(kerala)
A great fan of your videos
Thank you and I love your videos
Wonderful to hear Daventv Mr White 😀 Thank you!
Very interesting content ; great learning today!🙂
Excellent take as always, although I do question Daniel's somewhat contradictory advice. He says you should cut your losses but also that you shouldn't worry about bear markets. That would leave a beginner very confused as to what they're supposed to do in such situations. Because if there's a bear market and you've just started investing, it's likely that all of your investments will be in the red. So I cannot agree with simply cutting your losses unless you have reason to believe (based on data) that the intrinsic value of your asset has depreciated since you acquired it.
Thanks!
This chanell gives really content rich videos. This channel really deserve many more subscribers.
I'm glad you enjoy it Abdu Pallikandam! Appreciate the support!
A smart commander once fled from battle against an egotistical enemy, this led commander ego to give chase thinking he had the upper hand since he thought victory was certain. Commander smart plan do was to bait and ambush commander ego and his men. Ego and his men died in horror. "If you give Ego enough rope, tends to hang itself." Any fool with ego can be tricked by woman, hopes of power, fame, fortune of financial markets. Be Commander Smart, ambush opportunity.!!
Very very informative video..
🙌💸
Thanks for the review. I'm adding this book to my list. I've been working my investing game for 20+ years and read probably 50 books. Investing should be a personal development experience. My contribution of learned/experienced advice? As a final litmus, ask yourself: "would I feel happy and confident about losing (unrealized) money in this investment?" That has been epiphany for me
Have you seen your compounded knowledge pay off in cold cash?
Best video ever
stock a with a small amount. stock b with a large amount :)
Do you mean the mini-quiz at 08:00? 😁 Haha good answer! I would also love to put money in both of them, at least if the expectancy is, say,
I think you won!!
THX
Wish you’d also make a vid about the book ‚Misbehaving’ by Thaler
Thank you Swedish investor 🤗❤
Nice
What do you think about modifying the Graham's Formula with average P/E ratio chart in the last 5 years times average PBV chart in the last 5 years. I think it will more accurate than just fixed 15 P/E and 1,5 PBV
Stock B. Dahil mas mataas ang reward kaysa sa risk, kung may ten trades ka and you only got a 50% win rate, you would have still made a decent profit.
My guess: With stock A, you got an average gain of 21%, with Stock B you have an average 17%. Any opinions?
i agree with you
Can someone please tell me why it is a bad idea to invest 100% of ones money into the s&p 500 index fund? During a recession, you still have the same value unless you take money out so whats the point of balancing the portfolio with bonds?
Risk is not measured as the volatility of returns. Risk means permanent capital loss due to a bad investment or the business going bankrupt etc.
Love your videos and stock B
is the better investment
Cheers man! 🙌
Regarding the stocks - It may seem so, on first glance. Don't forget to take into account the size of the outcomes though. Stock B is more likely to have a positive payoff, but that positive payoff is not nearly as big as the one from stock A. Stock A is like betting on the underdog in a sports event. The payoff, if you win, is enormous. We can calculate the expected outcome of the two stocks in the following way: A: 90%*-10%+10%*300%=-9%+30%=21%, B: 10%*-10%+90%*20%=-1%+18%=17%. So the expected outcome of stock A is 4% higher than for stock B (21%-17%). This would indicate that stock A is better. Of course, this is only true if size your bets properly. If you invest 100% of your capital every time, you won't be able to reap the long-term benefit of the occasional huge payoffs of stock A.
I think Rodrigues is right with stock b being a better "investment" and you are right about stock being a better "trade"
If you take compounding into account, (b) is better.
Dang you guys are all wrong, the Swedish investor is correct to choose option A regardless of whether it is “trading or investment”.
Sir please make a review of "the little book of behavioural INVESTING. 🙏❤️
over the long therm trading stock A (210% gain) is more profitable than trading stock B (170% gain)
True priceless content in this channel. I wonder what's ur view on Tesla stocks (if u know what I mean), lol
I'm guessing that it is overvalued at the moment, but I'm not an expert on Tesla in any way. It's not the typical company that I would invest in myself, outside of my circle of competence, so I just try to stay away to be honest. I've already made one investing mistake in electrical vehicles and I hope that I won't be dumb enough to repeat that haha.
@@TheSwedishInvestor what were the mistake stickers if you do not mind sharing?
At 8:00 Stock A.
90% Risk of losing 10% and 10% Chance of winning 300%.
If it were accurate then I will take stock A 10 times.
My biggest failure was to keep losing stocks and expecting them to rise again. Don't do that ever. I won't.
Not wishing to be a pedant, Newton's first law: A body will remain at rest or in a uniform motion unless acted upon by an external force. So to apply to your example, what is the external force which curtails momentum investing?
Thanks for the these videos, I learn loads.
can you do videos of Warren Buffett investment techniques?
7:38 😂 lmao
With all these Geniuses in the world, their has to be a superior system to make superior investment choices. Anyone any ideas?
You don't need the "best" investment system for you to succeed. By simply refraining from acting foolish with your money, you'll be ahead of most "investors".
Would diversify stock
But stock A will have 66% chance for 20% growth
Stock a
Momentum investing a ludicrous idea. It is the complete opposite of value investing. Invest in improving fundamentals not stock price
To me, there are 2 most difficult emotional behavior to handle with.
1. Seek comforting rather than fact. I do it a lot. But how do I know if I am or I am not?
2. Regret. Constantly feel regretting for missing out a buy or for any lose I made. Always, never stop. :(
Thank you for sharing Hsiang An Wang 👍 I'm not sure how to treat the 2nd one, but for the 1st one I have a suggestion. Come up with predefined rules that an investment must fulfill for you to keep them in your portfolio. Keep them as objective as possible - preferably they should be quantifiable. Also, when buying a security for the first time - search actively for contradicting material. For instance, decide that you must always have at least 3 "potential pitfalls" attached to every investment before you make it.
136% people said yes means ? 36 people answered twice for the same qn ?
In a lot of your video's you mention Warren Buffet, and to sell stocks that are losing. But Warren Buffet never sells his stock. So why would we sell? Short term volatilities don't matter.
B Type stock
Raul Vanesette It might seem so, on first glance. Don't forget to take into account the size of the outcomes though. Stock B is more likely to have a positive payoff, but that positive payoff is not nearly as big as the one from stock A. Stock A is like betting on the underdog in a sports event. The payoff, if you win, is enormous. We can calculate the expected outcome of the two stocks in the following way: A: 90%*-10%+10%*300%=-9%+30%=21%, B: 10%*-10%+90%*20%=-1%+18%=17%. So the expected outcome of stock A is 4% higher than for stock B (21%-17%). This would indicate that stock A is better. Of course, this is only true if size your bets properly. If you invest 100% of your capital every time, you won't be able to reap the long-term benefit of the occasional huge payoffs of stock A.
Size matters... ,,😂😂😂😂🤣🤣
If you buy index funds... you officially hence part of the herd... the herd stronger than the individual? Personally, I actively manage and do stock picking... I love selling index funds before a crash (based on my perception and history knowledge), and buy them when index are down.... it allows me to have higher returns :P. In a low interest rate world.... PE means nothing, Debt is cheap, Growth is Goal... Value has to redefine itself or adapt
when u buy and sell index funds by timing the market, in the very long run like 25 yrs it wouldn't be any better than mutual fund...
Ceating on a partner?
He meant to write "cheating" instead.
The luxuriant nylon pathogenetically extend because diamond consquentially rub like a dear porcupine. romantic, puny halibut
THX