Zweig: Guard Against Following the Herd

Given the market’s currently stretched valuations, optimistic investors should be on their guard, says Jason Zweig of The Wall Street Journal. Zweig discusses new findings that show how the confidence of others can influence an individual’s decision-making to a larger degree than their own can. According to a recent report in the Journal of Neuroscience, there is a particular region of the human brain that monitors how positive other people are about their choices, writes Zweig. Daniel Campbell-Meiklejohn, a psychologist and leader of the study (conducted at the University of Sussex in the United Kingdom) explains, “The human brain has […]

Working through the Pain for the Best Long Term Gain

  In a Financial Planning article titled “Investing Should Be Painful,” founder of research firm Wealth Logic, LLC Alan Roth writes, “I suggest telling clients to embrace the pain and take it as a good sign.” This approach reflects insights from psychology and behavioral finance.  The “pain” Roth is referring to comes from going against the cognitive biases of the human brain. Borrowing from Nobel Laureate Daniel Kahneman and others, Roth describes the more automatic and emotional “system 1” thinking (in contrast to the slower, more effortful and logical “system 2” thinking) as the source of the pain investors feel […]