The Benefits of Self-Doubt

Warren Buffett and Ray Dalio are two of the most well-known, successful investors in the world. And The Wall Street Journal’s Jason Zweig says they have at least one key trait in common: They are open to criticism and self-doubt. “A deliberate, lifelong effort to find people to tell him why he might be wrong is one of the keys to Mr. Buffett’s success,” Zweig writes on WSJ’s MoneyBeat blog, discussing how Buffett took the rare step of inviting questions from a bearish investor at Berkshire Hathaway’s recent shareholder meeting. “It doesn’t come naturally to most investors.” (Hat tip to The […]

Sonders on “Rational Exuberance”

Retail investors have, at long last, been coming back to stocks in the first month or so of 2013, and Charles Schwab Chief Investment Strategist Liz Ann Sonders says it’s a rational move for them. In her latest market commentary, Sonders looks at how negative sentiment and mutual fund flows have gone over the past few years. She even cites one Franklin Templeton survey showing that the majority of investors weren’t even aware that the market had risen in 2009, 2010, in 2011. She says that while the recent influx of money into stock funds has been significant, it represents […]

Tilson, Heins, and Recency Bias

How did so many investors and analysts fail to recognize the looming economic and stock market crises in recent years? In their latest Forbes column, Whitney Tilson and John Heins say that “recency bias” is a big reason — and a major challenge facing all investors. “One of the more insidious investor biases is a natural tendency to assume that the future will look like the recent past,” write Tilson and Heins in explaining recency bias (sorry no link — the article is available only in Forbes magazine and is not online). “The best investors don’t fall into this trap.”