Internal Demons 心魔

I “look at” myself in accordance to Charles Ellis’s criteria:

心魔

Our internal demons and enemies are pride, fear, greed, exuberance and anxiety.  These are buttons that Mr Market most likes to push.  If you have them, that rascal will find them.  No wonder we are such easy prey for Mr Market with all his attention-getting tricks.

That’s why the best way to start learning how to be a successful investor is to follow the standard instruction:  Know thyself.

As an investor, your capabilities in two major realms will determine most of your success:  your intellectual capabilities and your emotional capabilities.

Ellis, D. C. (2010). Winning The Loser's Game. McGraw Hill. Pg 42

A.        Intellectual

A1.      Average, neither brilliant nor stupid. 

A2.      Mr Know-All as I read a lot – economy, economic theories, politics, psychology, sociology, philosophy, frictions and now investment books, articles on investing and finance. Someone mentioned sincerely that “it is difficult for others to work for me as I ‘too’ knowledgeable,” perhaps, sarcastically. 

A3.      Able to read and understand financial statements but too lazy to look into details.

A4.      A good administrator - methodical in keeping records and monitoring, organizing and preparations, systematic. 

A5.      A thinker - like to think things through and identify the basic principles

A6.      Good memory of facts – never try to deceive myself

A7.      Unable to absorb complex mathematics like standard deviations etc and not willing to put in the effort.

A8.      Philosophical – life is like the passing clouds, stock prices are illusions,

A9.      Love History – and how it is linked to present – trade has replace world conflicts (Lee Kuan Yew present this in USA Senate),

A10.   No Religion – believe in more Buddhist philosophy and Lao Tzuism.

A11.   Believe a lot in Lee Kuan Yew’s philosophy – Nothing is for free

A12.    Able to applied what I study in daily life        

Seek Enlightenment 知己知彼，百戰不殆

The Pig Seeks Enlightenment – Know Thyself

This Pig has started learning to walk on 2 legs  trying to avoid the fate of the fellow pigs, sheep, cows and chickens ……

知己知彼，百戰不殆

 

(pinyin: Zhī jǐ zhī bǐ, bǎi zhàn bù dài)

Literally: Know yourself and know your enemy, a hundred battles and you won't be drained.

Meaning: If you know both yourself and your enemy, you can win a hundred battles without a single loss.

Spend less time studying your investments and more time studying yourself. That's because how much money you make in an investment often depends far more on how you behave than on how it does. "It's people that lose money," says Patrick Chitwood, an investment adviser in Birmingham with a Ph.D. in psychology. "It's not investments."

How to handle Market crash, Jason Zweig , 1 Jan1997, http://money.cnn.com/magazines/moneymag/moneymag_archive/1997/01/01/220939/index.htm

I survived despite all my ignorance.    I like to attribute to luck but I, unashamedly think I have certain characteristics that helped and other traits that hinder me in investment.

 

非理性情绪

Homos mistakus

Not only we are sometimes irrational but we are predictably irrational.

Our emotions and much of our decision making process is ….. developed for survival … some 100,000 years ago ….quite useful.   What works for survival in the African jungles is not productive in the jungles of world finance.

By understanding ourselves and the way we make decisions, we can often create our own systematic process for making the right choices.

James Montier, How Not To Be Your Own Worst Enemy,2010

The Little Book of Behavioral Investing

John Wiley & Sons Inc 2010

If it is luck, can I continue investing – luck will run out? I do not want to depend on something as instable an element as luck.  I want to take responsibility for my money and investment.

幸运

When we say that someone has fallen on bad luck, we relieve that person of any responsibility for what has happened.  When we say that someone has had good luck, we deny that person credit for the effort that might have led to the happy outcome? But how sure can we be?  Was it fate or choice that decide the outcome?

Peter L Bernstein, Against the Gods

(The remarkable story of risk), 1998John Wiley & Sons, INC, Page 197

Know thyself   知己

As market commentator, George J.W. Goodman (“Adam Smith”) once said, if you don’t know who you are, the stock market is a very expensive place to find out.

Zweig, J. (2010). The Little Book of Safe Money. John Wiley & Son Inc. Pg 213

Starting this blog

A real time investment diary can be a very real benefit to investors because it helps to hold us true to our thoughts at the actual point in time, rather than our reassessed version of events after we know the outcomes.

An investment diary is a simple but very effective method of learning from mistakes and should form a central part of your approach to investment.

James Montier, How Not To Be Your Own Worst Enemy, 2010

John Wiley & Sons Inc

Result on Trend Following

Investor Personality Test Result

Trend-Following: Your result is Above Average

Herding

"Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one."

~ Charles MacKay (1841) Extraordinary Popular Delusions And The Madness Of Crowds

Trend-following refers to one's tendency to follow the crowd, relying on others for leadership and critical thinking. Trend-following can be profitable for investors (though many contrarians would disagree), provided that they recognize signs of trend formation and dissipation. Momentum investors are an example of trend-followers.

"Never, Ever Listen to Other Opinions.

To succeed in the markets, it is essential to make your own decisions. Numerous traders cited listening to others as their worst blunder. Walton and Minervini lost their entire investment stake because of this misjudgement."

~ Jack Schwager, Stock Market Wizards, Wizard Lessons #29

Contrarians score low on trend-following. Contrarians tend to bet against current trends or opinion when they are identifiably incorrect. Contrarians typically view the market consensus with suspicion, and are sometimes described in the same sentence as value investors.

Because the many market opportunities are created by the misbehaviour of the mass of investors, an understanding of crowd psychology is useful for investors.

"If your mind is not in gear with the markets, or if you ignore changes in mass psychology of crowds, then you have no chance of making money trading." ~ Alexander Elder (1993) Trading for a Living

Result on Intellectualism

Investor Personality Test Result

Intellectualism: Your result is Above Average.

"An intellectual is a man who takes more words than necessary to tell more than he knows."

Dwight D. Eisenhower (1890 - 1969)

Intellectual investors enjoy investigating complex concepts and abstractions. In general, intellectualism is a good thing for investors. High intellect underlies one’s curiosity about new investment ideas, and most great investors are intellectual.

However, without a disciplined and experienced mind, high intellectualism may lead to gathering "too much information" and "over-thinking." A hallmark of the excessively intellectual investor is the use of unnecessarily complex assumptions and methodologies.

Psychological research demonstrates that gathering more than 3 pieces of relevant information about any one decision leads to deteriorating decision quality. Apparently, analyzing too many independent details leads to eroded profitability.

Investors who are low scorers on intellectualism can more easily remain focused and without distractions or tangents in their thinking, but they are less sensitive to new ideas and opportunities. In contrast to investors, many successful traders score below average on intellectualism.

“Very low” scorers may not feel curiosity about new business ideas, which can reduce their performance if market conditions change.

Result on Discipline and Planning

Investor Personality Test Result

Impulse-control

Self-discipline : Above Average

Immediate Gratification : Below Average

Excitement-seeking : Low

 

Result on Risk-taking Biases

Investor Personality Test Result

Risk-taking Biases       

Risk Aversion : Above Average 

Emotional Vulnerability : Below Average

Holding Losers too Long : Below Average         

Cutting winners short : Low

Result on Optimism Biases

Investor Personality Test Result

BIAS REPORT        

Confidence Biases              

Overconfidence : Below Average   

Over-Optimism : Below Average     

               

Result on Over Confidence Biases

Investor Personality Test Result

BIAS REPORT        

Confidence Biases              

Overconfidence : Below Average   

Over-Optimism : Below Average     

               

 "Mutual fund managers, analysts, and business executives at a conference were asked to write down how much money they would have at retirement and how much the average person in the room would have. The average figures were $5 million and $2.6 million, respectively. The professor who asked the question said that, regardless of the audience, the ratio is always approximately 2:1."

Result on Personality Factors

Investor Personality Test Result

PERSONALITY FACTORS

Conscientiousness : High

Emotionality : Above Average

Extraversion : Below Average

Openness : Above Average

Agreeableness : Below Average

Test Result (Summary)

Investor Personality Test Result

Marketpsych send the summary result of my test almost instanteously to my email. I also lodge into its website to get detail explanations which will be posted separately. It was enlightening and informative.
Would be reflecting on these attributes.

Your report of the Investor Personality Test is as follows:

PERSONALITY FACTORS

Conscientiousness : High

Emotionality : Above Average

Extraversion : Below Average

Openness : Above Average

Agreeableness : Below Average

BIAS REPORT        

Confidence Biases              

Overconfidence : Below Average   

Over-Optimism : Below Average     

               

Risk-taking Biases

Risk Aversion : Above Average        

Emotional Vulnerability : Below Average       

Holding Losers too Long : Below Average      

Cutting winners short : Low              

               

 Impulse-control

Self-discipline : Above Average

Immediate Gratification : Below Average

Excitement-seeking : Low

Intellectualism

Intellectualism : Above Average

Herding

Trend-following : Above Average

               

 Thanks,

www.marketpsych.com

Investor Personality Test

Came across this article by Zweig and take the test.  Results with detail explanations are provided almost instanteously.  The test is Interesting and according to my self-assessment, quite accurate and reveal aspects that I have put in my subconsciousness.  Indeed, I learned a little more of myself and my investing behavior. 

This test is different from the run of the mill questionaires we are requested by banks to complete in order to purchase certain investment products.  I have completed several perfunctiory questionaires certifing me as a sophisticated investor (in order to purchase equity linked notes), and risk tolerance as required by the Monetary Authority of Singapore from the bank.  I have the feeling of being designated as an oxymoron rather than a sophisticated investor.  More on this issue in future.

Every investor should make an attempt to take this test which is free. 

Investor Take This Test

Jason Zweig. Investor Take This Test;

Total Return

The Wall Street Journal's personal-finance blog

October 18, 2011

http://blogs.wsj.com/totalreturn/2011/10/18/investor-take-this-test/

Extract

 At MarketPsych.com, you can take an “Investor Personality Test” that takes 15 or 20 minutes to fill out and, based on my results, at least, seems to give a fairly accurate picture of what makes you tick.  The test skips all the nonsense about what you think you would do if the Dow crashed or how much you believe you know about the markets.  Instead, it measures five dimensions of personality: agreeableness, extraversion, openness, emotional sensitivity and conscientiousness.  It also measures a variety of secondary traits, including optimism, overconfidence and excitement-seeking.