The Behavioral Investor Quotes

“The fact that your brain becomes more risk seeking in bull markets and more conservative in bear markets means that you are neurologically predisposed to violate the first rule of investing, “buy low and sell high.” Our flawed brain leads us to subjectively experience low levels of risk when risk is actually quite high, a concept that Howard Marks refers to as the “perversity of risk.”
― Daniel Crosby, The Behavioral Investor

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― Doctor Daniel Crosby, The Behavioral Investor: How psychology shapes wealth, risk, and investment decisions

“H.A.L.T. – that would also serve investors very well. The acronym stands for hungry, angry, lonely, tired and is a reminder to abstain from making important decisions in any of these emotional states.”
― Daniel Crosby, The Behavioral Investor

“Thales of Miletus was the founder of the school of natural philosophy, a contemporary of Aristotle and one of the seven sages of ancient Greece. Tasked with inscribing short words of wisdom onto the Temple of Apollo at Delphi, Thales was asked what the hardest and most important task of humanity was, to which he replied, “To know thyself.” He was then asked the inverse and replied that “giving advice” was the thing least profitable to humankind that came very easily.”
― Daniel Crosby, The Behavioral Investor

“Humans are wired to act; markets tend to reward inaction.”
― Daniel Crosby, The Behavioral Investor

“While we tend to think of bear markets as risky, true risk actually builds up during periods of prosperity and simply materializes during bear markets. During good times, investors bid up risk assets, becoming less discerning and more willing to pay any price necessary to take the ride.”
― Daniel Crosby, The Behavioral Investor

“Once these basic needs are met, quality of life has less to do with buying happiness and more to do with individual attitudes.”
― Daniel Crosby, The Behavioral Investor

“When a proposal to change a certain parameter is thought to have bad overall consequences, consider a change to the same parameter in the opposite direction. If this is also thought to have bad overall consequences, then the onus is on those who reach these conclusions to explain why our position cannot be improved through changes to this parameter. If they are unable to do so, then we have reason to suspect that they suffer from status quo bias.”
― Daniel Crosby, The Behavioral Investor

“Odds are that many readers would have landed on DaVinci’s Mona Lisa, arguably the most iconic piece of art in the world. But did you know that what we now consider his masterwork was not too long ago considered a rather mediocre representation of his work? The story of how the Mona Lisa became the avatar of artistic excellence is one of criminal activity and intrigue that relies heavily on human psychology. In 1911, a handyman at the Louvre removed the painting from its place in the museum and took it home. The utter lack of security measures surrounding the Mona Lisa is a testament to its unextraordinary reputation at the time. It was over 24 hours until anyone even noticed that the painting was missing! But as newspapers started to report on the robbery, awareness of the painting increased as the mystery surrounding the heist became a full-blown media sensation. After it was recovered two years later, the Mona Lisa became the most popular painting in the museum, as interested patrons clamored to see what all of the fuss had been about. Only after the heist and in light of its newfound popularity did the Mona Lisa earn the reverence and esteem of the art world. We imagine that the Mona Lisa is popular because it is so special, but in reality, it is seen as special precisely because it first became popular.”
― Daniel Crosby, The Behavioral Investor

“Equity markets provide an exception to the heuristic that social coherence trumps logic. You were born to fit in, but investing requires you to stand out. You are wired to protect your ego, but success in markets demand that you subvert it. You are programmed to ask, “Why?”, but must learn to ask, “Why not?”
― Daniel Crosby, The Behavioral Investor: How psychology shapes wealth, risk, and investment decisions

“So much of human behavior - political, religious, financial - can be explained by the fact that we want to think the best of ourselves and don’t want to work very hard to do it.”
― Daniel Crosby, The Behavioral Investor: How psychology shapes wealth, risk, and investment decisions

“Far from seamlessly assimilating new ideas into our existing belief framework, research shows that we actually tend to get more firm in our cherished beliefs when those beliefs become challenged.”
― Daniel Crosby, The Behavioral Investor: How psychology shapes wealth, risk, and investment decisions

“But the paradox in owning our personal mediocrity is that it makes us, in the strictest sense of the word, exceptional. It is not about believing in yourself - in fact, it’s quite the opposite. It’s about realizing that the less you need to be special, the more special you’ll become… Exceptional investment outcomes are attainable by all of us, if we just stop trying so hard.”
― Daniel Crosby, The Behavioral Investor: How psychology shapes wealth, risk, and investment decisions

“One of the things that makes adhering to probabilities so difficult (and profitable) for an investor is that emotion has a pronounced impact on how we assess probability. Predictably, positive emotion leads us to overstate the likelihood of positive occurrences and negative emotion does just the opposite. This coloring of probability leads us to misapprehend risk… All too often we confuse the intensity of our longing with the probability of our winning.”
― Daniel Crosby, The Behavioral Investor: How psychology shapes wealth, risk, and investment decisions

“For a factor to be worthwhile to a behavioral investor it must be empirically supported, theoretically sound and behaviorally intransigent.”
― Daniel Crosby, The Behavioral Investor: How psychology shapes wealth, risk, and investment decisions

“Being a behavioral investor is less about adhering to some textbook notion of rationality and more about understanding and bending the idiosyncrasies of human nature to our advantage.”
― Daniel Crosby, The Behavioral Investor: How psychology shapes wealth, risk, and investment decisions

“This book could have easily been three words long: automate, automate, automate. It likely wouldn't have sold well, and you might have ignored the advice on account of it seeming too simple, but the fact is that many of the thornier elements of emotion can be done away with entirely by slavishly following a system of investment rules in all types of market weather.”
― Daniel Crosby, The Behavioral Investor: How psychology shapes wealth, risk, and investment decisions

“The behavioral investor understands and seeks to mimic the best parts of passive investing - low turnover, rock bottom fees and appropriate diversification - without succumbing to absentminded buying and selling.”
― Daniel Crosby, The Behavioral Investor: How psychology shapes wealth, risk, and investment decisions

“Intuition is the silent coming together of a lifetime of learning and must be cultivated if it is to be useful.”
― Daniel Crosby, The Behavioral Investor: How psychology shapes wealth, risk, and investment decisions

“Understanding the impact of human physiology on investment decision-making is an underappreciated area of study that represents a unique source of advantage for the thoughtful investor.”
― Daniel Crosby, The Behavioral Investor

“Revisiting Batnick’s periods of low real returns using Shiller CAPE, we also observe that long periods of poor performance often begin with overvaluation that is worked off over time. The Shiller CAPE levels of the broad market on January 1 of each the years cited above were as follows: 1929 – 27.06 1944 – 11.05 1965 – 23.27 2000 – 43.77 Today – 28.80 Mean – 16.67”
― Daniel Crosby, The Behavioral Investor

“In a path-breaking work on the nature of bubbles, Greenwood, Shleifer and You (‘Bubbles for Fama’) share some fascinating findings. Among the most compelling is that only a slight majority of bubbles actually burst.”
― Daniel Crosby, The Behavioral Investor

“Prepare for bursting bubbles without being too fine-tuned to them.”
― Daniel Crosby, The Behavioral Investor

“The next time you feel as though you must buy or sell a security, or that you are certain of where the financial markets are headed, take a moment to explain, in detail, the factual reasons why this is so. You’re likely to find that your enthusiasm has gotten the best of your brain and nothing brings them back into sync like having to teach.”
― Daniel Crosby, The Behavioral Investor

“Considered from a behavioral lens, diversification is humility made flesh, the embodiment of managing ego risk. Diversification is a concrete nod to the luck and uncertainty inherent in money management and an admission that the future is unknowable.”
― Daniel Crosby, The Behavioral Investor

“Statman, Thorley and Vorkink found that investors absolutely “confuse brains with a bull market,” attributing their own success to skill and not the fact that a rising tide had lifted all boats.69 As a result, trading volumes were found to rise dramatically following good times and fall precipitously in bad times, effectively buying high and selling low.”
― Daniel Crosby, The Behavioral Investor