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Showing posts from November, 2009

Why Smart People Make Dumb and Costly Mistakes With Money

"I can calculate the motion of heavenly bodies, but not the madness of people."

Sir Isaac Newton, Response to the 1720 collapse of the "South Sea Bubble"

Isaac Newton not only invented Calculus and discovered his Three Laws of Motion. Isaac Newton also lost a majority of his wealth in the South Sea Bubble, falling victim to behavioral mistakes investors make.  Research indicates that humans are not naturally wired for prudent, long-term investing. And if a genious like Isaac Newton falls victim, what are ordinary investors supposed to do?

In the video accessible through the link below Scott Bosworth of Dimensional Fund Advisors describes common forms of behavioral bias and discusses how these biases influence investment decision making. He also explains how knowledge and discipline can help investors control their instincts for a better investment outcome.

Click here to watch the video. (Approximate run time is 20 minutes.)