The Psychology of Investing Biases
Many of us may have already learnt and put into practice a few if not all the known psychology of investing biases.
How about taking profit is never wrong; but missing those huge capital gains and dividends over the following years?
What kind of investing bias is this?
Anyone knows?
Loss aversion ... cutting winners short.
ReplyDeleteKiasu mah ... Kekeke! Don't let a win turn into a loss haha.
Taking profit is ok, but ideally should be done when the asset is expensive e.g. within 10% of its highest historical valuation, or current valuation is +2 or +3 standard deviation from its long-term average.
Rebalancing is 1 method for this ... But not too frequent...
Or for trend followers ... when a predetermined trailing stop is hit...
Spur😁