Behaviour
Knowing when to do nothing
Action bias produces most of the damage in retail investing, and inaction is an active choice rather than an absence of one.
Clara Mensah
25 articles by Mensah
Behaviour
Automating your investing
Every decision removed is a decision that cannot be made badly, and the evidence on discretion is not encouraging.
Risk & Volatility
Preparing a portfolio for someone else
A portfolio that only one person understands is fragile, and the failure mode arrives at the worst possible time.
Behaviour
Making decisions with a partner
Two people with different risk tolerances need a shared plan, and one person holding all the knowledge is a vulnerability.
Behaviour
Regret, comparison and other people
Investment decisions are made in a social context, and comparison drives more behaviour than analysis does.
Risk & Volatility
What a decline actually feels like
The statistics describe the magnitude and not the experience, and the experience is what determines behaviour.
Behaviour
Writing an investment policy for yourself
One page written when calm prevents most of the decisions that damage portfolios during stress.
Risk & Volatility
Understanding volatility measures
Standard deviation, beta, drawdown and value at risk each measure something different, and all have known limitations.
Risk & Volatility
Correlation and why it fails when needed
Assets that move independently in calm conditions frequently move together during stress, which is when it matters.
Behaviour
Financial media and how to read it
It is produced continuously for attention, which makes it a poor input into decisions with thirty-year horizons.
Behaviour
Herding, bubbles and manias
The pattern repeats with different assets, and recognising it in progress is considerably harder than recognising it afterwards.
Risk & Volatility
Stress testing your own plan
A plan that works in expected conditions is not a plan, and testing it against bad ones takes an afternoon.
Risk & Volatility
Currency risk for investors
It matters more for bonds than for equities, hedging has a cost, and the decision should follow the purpose of the holding.
Behaviour
Investment scams and how they work
The patterns are consistent, the losses are large, and a two-minute check prevents most of them.
Behaviour
Loss aversion and the pain of falling markets
Losses are felt roughly twice as intensely as equivalent gains, which explains a great deal of investor behaviour.
Risk & Volatility
Liquidity risk and why it surprises people
The ability to sell is assumed until it is absent, and it disappears at precisely the moment it is needed.
Risk & Volatility
Leverage and why it magnifies both ways
Borrowing to invest raises expected returns and raises the probability of being forced to sell at the worst moment.
Behaviour
Chasing performance
Money flows towards recent winners and away from recent losers, and both directions cost investors money.
Behaviour
Overconfidence and the illusion of skill
Most people rate themselves above average, and in investing the consequence is measurable in returns.
Risk & Volatility
Concentration risk and employer shares
Holding a large position in the company that also pays your salary is one of the most common and least examined risks.
Risk & Volatility
Sequence risk and why it matters at retirement
The order in which returns arrive is irrelevant while accumulating and decisive while withdrawing.
Behaviour
Why forecasts do not help
The record of market and economic forecasting is poor, and acting on forecasts is worse than ignoring them.
Behaviour
The behaviour gap
Investors persistently earn less than the funds they hold, and the difference is entirely a matter of timing decisions.
Risk & Volatility
Market falls: what history actually shows
Declines are frequent, recoveries are uneven, and the most damaging response is the most natural one.
Risk & Volatility
What risk actually means in investing
Volatility is not the same as risk, and the risk that matters is the risk of not meeting your objective.