Thinking About Investing (Part 2)

How can we be more intelligent investors?

Global Market Update - Rodin The Thinker
Rodin, The Thinker. Source: Metropolitan Museum of Art

Investing is a mental exercise. Form a financial plan, then implement it, then review it. These are all conceptual activities—physical prowess is not required. But investing isn’t like studying philosophy or engineering. It engages our emotions. And our emotions habitually make us act less intelligently.

One common way they do this is through something called “loss aversion.” We’re more troubled by losses than we’re encouraged by gains. Studies show that the emotional pain of taking a loss is about twice that of realizing a profit. So we let this color our portfolios, selling winners and letting the losers run as we wait for them to come back. Repeat this often enough and we end up with a portfolio of frogs and toads.

But intelligent investing isn’t about anticipating gains or losses. It’s about buying suitable securities at suitable prices. To do this we need to understand the markets. Even more importantly, we need to understand ourselves.

Douglas R. Tengdin, CFA
Chief Investment Officer
Phone: 603-224-1350
Leave a comment if you have any questions—I read them all!

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By | 2017-07-17T12:23:02+00:00 March 3rd, 2015|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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