Don’t congratulate yourself or berate yourself too much your choices are half chance.  This is one of those great wisdoms of life, which can be applied to every aspect of your daily living including your investment successes and failures.

Hindsight is a perfect science.  When we look back it always appears to have been so obvious.  If only I had…………………

Needless to say those investors who took advantage of the steep correction in early 2009 to invest have profited handsomely on the recovery and are feeling great.  Those who decided to adopt a wait and see strategy are more than likely kicking themselves for not having invested.  Looking back both investors would agree it was so obvious, which is not necessary true.  This is what behavioural scientists call hindsight bias.

The danger of hindsight bias is that it can lead investors to thinking they have more predictive powers than they actually do, which can lead to excessive risk taking especially when combined with an overconfidence bias resulting from prior successes.

“So don’t congratulate yourself too much or berate yourself too much your choices are half chance”.  This certainly seems applicable in the current investment environment, which more than often resembles that of a casino and reminds me of the following quote, “If you think you have all the answers you probably don’t understand the question”.

 

Mark Williams
Mcomm, CFP®, HdipTax
T. 021-851 3746
E. service@synfin.co.za

 

Half Chance