Why Smart People Make Big Money Mistakes And How To Correct Them Quotes

“Trying to extract every last dime out of your financial decisions is likely to incur significant social and psychic costs. As you’ve no doubt noticed, not everyone likes a person who’s obsessed with money. And even if everyone did, an insistence on always making the best financial decision in a given situation can lead to excessive worry and anxiety.”
― Gary Belsky, Why Smart People Make Big Money Mistakes and How to Correct Them: Lessons from the Life-Changing Science of Behavioral Economics

“you tend to beat yourself up when your decisions turn out poorly.”
― Gary Belsky, Why Smart People Make Big Money Mistakes and How to Correct Them: Lessons from the Life-Changing Science of Behavioral Economics

“In essence, the endowment effect is really just another manifestation of loss aversion: People”
― Gary Belsky, Why Smart People Make Big Money Mistakes and How to Correct Them: Lessons from the Life-Changing Science of Behavioral Economics

“People place too much emphasis on their out-of-pocket expenses (what they have to pay now) and too little value on opportunity costs (what they miss by not taking an action).”
― Gary Belsky, Why Smart People Make Big Money Mistakes and How to Correct Them: Lessons from the Life-Changing Science of Behavioral Economics

“People tend to overvalue what belongs to them relative to the value they would place on the same possession or circumstance if it belonged to someone else.”
― Gary Belsky, Why Smart People Make Big Money Mistakes and How to Correct Them: Lessons from the Life-Changing Science of Behavioral Economics

“How many tales have you heard—or lived through—in which Jane and John Homebuyer couldn’t pull the trigger on their dream house only to see the price go up when another bidder entered the game? Of greater concern, though, is the conflict sparked by the glut of investment options available today.”
― Gary Belsky, Why Smart People Make Big Money Mistakes and How to Correct Them: Lessons from the Life-Changing Science of Behavioral Economics

“The sting of losing money, for example, often leads investors to pull out of the stock market unwisely when prices dip.”
― Gary Belsky, Why Smart People Make Big Money Mistakes and How to Correct Them: Lessons from the Life-Changing Science of Behavioral Economics

“The goal is not to justify your decision to buy the investment at whatever price you originally paid for it.”
― Gary Belsky, Why Smart People Make Big Money Mistakes and How to Correct Them: Lessons from the Life-Changing Science of Behavioral Economics

“That’s why it’s often helpful to invest in a spreadsheet computer program such as Excel, a software package like Quicken, or any number of Internet sites, that can display and total all your investments.”
― Gary Belsky, Why Smart People Make Big Money Mistakes and How to Correct Them: Lessons from the Life-Changing Science of Behavioral Economics

“For diversification to work as a salve for the pains of loss, you must avoid looking at losses or gains in isolation.”
― Gary Belsky, Why Smart People Make Big Money Mistakes and How to Correct Them: Lessons from the Life-Changing Science of Behavioral Economics

“That’s why any money you’ll need within the next five years should be removed from stocks and put into cash or cash equivalents like government bonds.”
― Gary Belsky, Why Smart People Make Big Money Mistakes and How to Correct Them: Lessons from the Life-Changing Science of Behavioral Economics

“So ask yourself: “If the stock market drops 25 percent tomorrow, would I be tempted to pull all or some of my money out?” If the answer is yes, you’re probably unprepared for the ups and downs of the stock market.”
― Gary Belsky, Why Smart People Make Big Money Mistakes and How to Correct Them: Lessons from the Life-Changing Science of Behavioral Economics

“Our advice? Put no more than 10 percent of your nest egg into stocks of individual corporations. The rest should be spread out over other kinds of investments.”
― Gary Belsky, Why Smart People Make Big Money Mistakes and How to Correct Them: Lessons from the Life-Changing Science of Behavioral Economics

“Throughout this book we’ll gradually build an argument that many individuals should consider an automatic approach to investing by relying primarily on mutual funds—specifically index mutual funds, which try to do nothing more than mimic the performance of the stock and bond markets in general.”
― Gary Belsky, Why Smart People Make Big Money Mistakes and How to Correct Them: Lessons from the Life-Changing Science of Behavioral Economics

“you tend to sell winning investments more readily than losing ones. • you’re seriously tempted to take money out of the stock market when prices fall.”
― Gary Belsky, Why Smart People Make Big Money Mistakes and How to Correct Them: Lessons from the Life-Changing Science of Behavioral Economics

“Even if your own answer to these questions is no, it’s a fact that individuals tend to sell winning investments too quickly and keep losing ones too long. It was verified in 1997 by two researchers, Terrance Odean and Brad Barber. They analyzed the trading records of ten thousand accounts at a large national discount brokerage firm over a seven-year period beginning in 1987 and ending in 1993. Among other findings, their gargantuan research effort highlighted a pair of remarkable facts. First, investors were in fact more likely to sell stocks that had risen in price rather than those that had fallen.”
― Gary Belsky, Why Smart People Make Big Money Mistakes and How to Correct Them: Lessons from the Life-Changing Science of Behavioral Economics

“And that is why, when attempting to balance and evaluate their investment port-folio, people often err by failing to knock down mental walls among accounts. As a result, their true portfolio mix—the combination of stocks, bonds, real estate, insurance policies, mutual funds, and the like—is often not what they think, and their investment performance often suffers.”
― Gary Belsky, Why Smart People Make Big Money Mistakes and How to Correct Them: Lessons from the Life-Changing Science of Behavioral Economics

“home prices don’t rise as fast or as much as Americans think, and even when they do, such levels are rarely sustainable (as we have seen in recent years). So there is often no financial justification for buying more house than you can afford in the hope that price hikes will reward you later.”
― Gary Belsky, Why Smart People Make Big Money Mistakes and How to Correct Them: Lessons from the Life-Changing Science of Behavioral Economics

“Such guidelines might be instinctive (a long line at a restaurant probably means business is good) or societally reinforced (it’s a good idea to stretch your budget when buying a house), but in either case, they are sometimes misleading.”
― Gary Belsky, Why Smart People Make Big Money Mistakes and How to Correct Them: Lessons from the Life-Changing Science of Behavioral Economics

“Americanesia Expressaphobia, n 1. Financial affliction, first diagnosed in late twentieth century, where the sufferer forgets the amount charged on a credit card but is terribly afraid that it’s way too much. Closely related to Visago, n, where a high level of debt prompts feelings of nausea and dizziness.”
― Gary Belsky, Why Smart People Make Big Money Mistakes and How to Correct Them: Lessons from the Life-Changing Science of Behavioral Economics

“The notion of mental accounts is absent in traditional economic theory, which holds that wealth in general, and money in particular, should be fungible: That is, $100 in roulette winnings, $100 in salary, and a $100 tax refund should have the same significance and value to you, since each C-note could buy the same number of downloads from iTunes or the same number of burgers at McDonald’s. Likewise, $100 kept under the mattress should invoke the same feelings or sense of wealth as $100 in a bank account or $100 in U.S. Treasury securities (ignoring the fact that money in the bank, or in T-bills, is safer than cash under the bed). If money and wealth are fungible, there should be no difference in the way we spend gambling winnings or salary.”
― Gary Belsky, Why Smart People Make Big Money Mistakes and How to Correct Them: Lessons from the Life-Changing Science of Behavioral Economics

“Would I buy this today, at this price?” If not, you may not want to own it any longer.”
― Gary Belsky, Why Smart People Make Big Money Mistakes and How to Correct Them: Lessons from the Life-Changing Science of Behavioral Economics

“As part of an effort to prod college seniors to get tetanus shots, a group of students was given a lecture meant to educate them about the dangers of tetanus and the importance of getting inoculated against it. A large majority of those students reported that they were convinced and planned to get their shots, but in the end only 3 percent got them. Bu another group of students, who were presented with the same lecture, had a 28 percent inoculation rate. The difference? The second group was given a map of the campus and asked to plan their route to the health center and pick a date and time to go. Sometimes, you see, motivation isn't our problem. Rather, we need to identify life's everyday mental obstacles - regret, fatigue, overconfidence, fear, to name just four - and put ourselves into position to hurdle them.”
― Gary Belsky, Why Smart People Make Big Money Mistakes and How to Correct Them: Lessons from the Life-Changing Science of Behavioral Economics