Investing can be complicated, and our emotions often make it even more challenging. Investing bias will alter our investment decisions, usually for the worse. So, in this post we’ll discuss six practical ways to reduce investing biases, making your investing journey clearer, calmer, and more successful. Ignore the "Ups and Downs" Making decisions based on past performance has proven to be a...
Investing in the stock market can be a challenging and complex process, requiring careful analysis and strategic decision-making. However, the human mind is prone to certain cognitive biases that can cloud our judgment and lead to irrational investment decisions. Mean reversion, anchoring bias, and the gambler's fallacy are three such biases that can impact the way we process and interpret...
Overconfidence shows up as a common investing bias that can drag down our returns. But, merely recognizing our overconfidence can improve our results. This post describes some of the ways that overconfidence fools us and how to overcome it. Overconfidence bias is a cognitive bias where individuals overestimate their own abilities and the accuracy of their beliefs and predictions. This can...
This post describes three common investing biases and how to overcome them. Overconfidence Bias, Loss Aversion Bias, and Confirmation Bias are each discussed. Overcoming these common investing biases will greatly improve your portfolio’s performance and help you gain more consistent returns that meet your objectives. Overconfidence Bias Overconfidence bias is when our subjective confidence in our own judgments is reliably greater than...
Successful investing might be easier to achieve than many might expect. The trick is not using some complicated strategy. But instead, sticking to simple, easy to understand, and consistent principles. In this post, inspired by investment advisor Ben Felix, I’ll share 19 insightful lessons about successful investing that highlight the importance of simplicity and consistency, when thinking about the keys...
Canada recently increased the tax rate on capital gains. So, investors are asking: “how to avoid capital gains tax in Canada”? This post will provide Canadian investors with a few strategies to avoid paying capital gains tax. Especially considering recent capital gain tax rate increases. Power of Buy-and-Hold Before discussing ways to avoid capital gains tax in Canada. Let’s consider what makes...
“Let your profits run, and cut your losses”. Is a phrase coined by economist David Ricardo encouraging investors to resist the urge to sell profitable positions too early. The adage has roots in simple math. A losing position can only fall 100%, whereas a winning one can potentially gain infinitely. So, how can this timeless wisdom help investors today? This...
The rise of indexing has crossed a new threshold. Passive strategies now make up more than 50% of all investment assets. Recent reports show we’ve crossed the Rubicon of passive vs active investing. Indexing has won! The reasons are clear: indexing outperforms active management most of the time. And, its much easier for investors to achieve better returns with less...
The evolution from index to factor-based investing has become increasingly nuanced. Investors are recognizing a deeper understanding of market dynamics and investor behavior. Initially, the widespread adoption of index funds in the 1990s was largely attributed to the Efficient Market Hypothesis. This theory posits the stock market's efficiency made it rare for active managers to consistently outperform passive benchmarks. However, as...
In the serene landscapes of rural life, two distinct types of farmers thrive - the chicken farmer and the egg farmer. While both operate farms, they adopt vastly different strategies. Mirroring the diverse approaches in the world of portfolio investing. This post explores these strategies and draws parallels with the investment philosophy of Warren Buffett, while describing why a time-tested...
