Nothing defines humans better than their willingness to do irrational things in the pursuit of phenomenally unlikely payoffs. This is the principle behind lotteries and dating…”
br>– Scott Adams, creator of the comic strip Dilbert
UPDATED May 2016: With full confidence, I can say that you are irrational when it comes to investing.
I know this not from talking to your broker or your mother-in-law, and I haven’t hacked into your portfolio statements. I know this because you’re human.
What will happen in the stock market isn’t predictable. But one thing is absolutely for sure and for certain: Investors are predictably irrational. We’re not talking smart or stupid, sophisticated or naïve. We’re talking across-the-board irrational.
So maybe you’re thinking that you’re the exception. You think you can handle the volatility of the market by just gritting your teeth and praying everything turns out all right as you roll the dice in the Wall Street Casino. Or maybe you think that at the first sign of trouble, you’ll be able to bail out of stocks and into bonds or money market funds to lock in your gains.
Researchers say, “Nope, that’s not what’s happening…”
[Read more…] “Are you a predictably irrational investor?”