{"id":61,"date":"2024-07-16T14:12:32","date_gmt":"2024-07-16T14:12:32","guid":{"rendered":"https:\/\/europaskolos.lt\/index.php\/2024\/07\/16\/at-the-money-investing-is-hard\/"},"modified":"2024-07-16T14:12:32","modified_gmt":"2024-07-16T14:12:32","slug":"at-the-money-investing-is-hard","status":"publish","type":"post","link":"https:\/\/europaskolos.lt\/index.php\/2024\/07\/16\/at-the-money-investing-is-hard\/","title":{"rendered":"At the Money: Investing Is Hard"},"content":{"rendered":"<p> <br \/>\n<\/p>\n<div>\n<p><iframe class=\"lazy lazy-hidden\" style=\"width: 100%; max-width: 660px; overflow: hidden; border-radius: 10px;\" data-lazy-type=\"iframe\" data-src=\"https:\/\/embed.podcasts.apple.com\/us\/podcast\/at-the-money-investing-is-hard\/id730188152?i=1000661817136\" height=\"175\" frameborder=\"0\" sandbox=\"allow-forms allow-popups allow-same-origin allow-scripts allow-storage-access-by-user-activation allow-top-navigation-by-user-activation\"><\/iframe><\/p>\n<p><noscript><iframe style=\"width: 100%; max-width: 660px; overflow: hidden; border-radius: 10px;\" src=\"https:\/\/embed.podcasts.apple.com\/us\/podcast\/at-the-money-investing-is-hard\/id730188152?i=1000661817136\" height=\"175\" frameborder=\"0\" sandbox=\"allow-forms allow-popups allow-same-origin allow-scripts allow-storage-access-by-user-activation allow-top-navigation-by-user-activation\"><\/iframe><\/noscript><\/p>\n<p>\u00a0<\/p>\n<p>\u00a0<\/p>\n<p><a href=\"https:\/\/podcasts.apple.com\/us\/podcast\/at-the-money-investing-is-hard\/id730188152?i=1000661817136\" target=\"_blank\" rel=\"noopener\">\u00a0Investing Is Hard with Brian Portnoy<\/a>\u00a0(July 10, 2024)<\/p>\n<p>Why is investing so hard? It\u2019s because our brains have been trained, over thousands of years, to trust our fear instincts. In this episode, I speak with Brian Portnoy sits down with Barry Ritholtz to explain why humans aren\u2019t built to be good investors. Portnoy has held senior investment roles throughout the hedge fund and mutual fund industries.<\/p>\n<p>Full\u00a0<a href=\"https:\/\/ritholtz.com\/2024\/07\/atm-investing-is-hard\/#more-332606\" rel=\"noopener\">transcript below<\/a>.<\/p>\n<p style=\"text-align: center;\">~~~<\/p>\n<p>About this week\u2019s guest:<\/p>\n<p>Brian Portnoy is founder and CEO of\u00a0<a class=\"gtrackexternal\" href=\"https:\/\/www.shapingwealth.com\/\" target=\"_blank\" rel=\"noopener\">Shaping Wealth<\/a>, which helps advisors and their clients to achieve \u201cfunded contentment,\u201d and operates as an outsourced Chief Behavioral Officer. Portnoy has held senior investment roles throughout the hedge fund and mutual fund industries.<\/p>\n<p>For more info, see:<\/p>\n<blockquote>\n<p><a class=\"gtrackexternal\" href=\"https:\/\/www.shapingwealth.com\/team\" target=\"_blank\" rel=\"noopener\">Shaping Wealth Bio<\/a><\/p>\n<p><a class=\"gtrackexternal\" href=\"https:\/\/twitter.com\/brianportnoy\" target=\"_blank\" rel=\"noopener\">LinkedIn<\/a><\/p>\n<p><a class=\"gtrackexternal\" href=\"https:\/\/www.linkedin.com\/in\/brianportnoy\/\" target=\"_blank\" rel=\"noopener\">Twitter<\/a><\/p>\n<\/blockquote>\n<p style=\"text-align: center;\">~~~<\/p>\n<p>\u00a0<\/p>\n<p>Find all of the previous At the Money episodes in the MiB feed on\u00a0<a class=\"gtrackexternal\" href=\"https:\/\/podcasts.apple.com\/us\/podcast\/masters-in-business\/id730188152\" target=\"_blank\" rel=\"noopener\">Apple Podcasts<\/a>,\u00a0<a class=\"gtrackexternal\" href=\"https:\/\/www.youtube.com\/playlist?list=PLe4PRejZgr0PzN7r8NikAnOqP70DHhoJ0\" target=\"_blank\" rel=\"noopener\">YouTube<\/a>,\u00a0<a class=\"gtrackexternal\" href=\"https:\/\/open.spotify.com\/show\/5LGxKlY6fzXS3tGsjB23Cb\" target=\"_blank\" rel=\"noopener\">Spotify<\/a>, and\u00a0<a class=\"gtrackexternal\" href=\"https:\/\/www.bloomberg.com\/podcasts\/series\/master-in-business\" target=\"_blank\" rel=\"noopener\">Bloomberg<\/a>.<\/p>\n<p>\u00a0<\/p>\n<p><iframe class=\"lazy lazy-hidden\" style=\"border-radius: 12px;\" data-lazy-type=\"iframe\" data-src=\"https:\/\/open.spotify.com\/embed\/episode\/3PaydcCemT3fdkyASrYpM6?utm_source=generator\" width=\"100%\" height=\"352\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<p><noscript><iframe loading=\"lazy\" style=\"border-radius: 12px;\" src=\"https:\/\/open.spotify.com\/embed\/episode\/3PaydcCemT3fdkyASrYpM6?utm_source=generator\" width=\"100%\" height=\"352\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/noscript><\/p>\n<p>\u00a0<\/p>\n<p>\u00a0<\/p>\n<p>TRANSCRIPT<\/p>\n<p>\u00a0<\/p>\n<p><strong>Barry Ritholtz<\/strong>:\u00a0 Have you ever wondered why investing is so hard? Why is it that your instincts always lead you astray? Why are stories so compelling but probabilities\u00a0 Why do you join the crowd buying in at the top and then panic sell at the bottom?<\/p>\n<p>As it turns out, you\u2019re just not built for this. I\u2019m Barry Ritholtz, and on today\u2019s edition of\u00a0<em>At The Money<\/em>, we\u2019re going to discuss evolutionary psychology and what it means for your portfolios. To help us unpack all of this, Let\u2019s bring in Brian Portnoy. His firm, Shaping Wealth, helps financial professionals with both money and meaning.<\/p>\n<p>So, Brian, welcome to At The Money. It turns out that investing is hard for a reason. Tell us about that.<\/p>\n<p><strong>Brian Portnoy<\/strong>: Thanks, Barry. We weren\u2019t wired for this. The brain between our ears is more than 100,000 years old. All right, so we\u2019re working with pretty old machinery, money, which we probably take for granted is a relatively new invention.<\/p>\n<p>Let\u2019s just call it to make it easy, 3000 years old.\u00a0 The brain\u2019s 100, 000 years old. Money\u2019s 3000 years old. The way we evolved was not to spend and save wisely or to invest using modern portfolio theory. No, we are wired to survive in a wild and dangerous environment. We\u2019re money was not even a thing. So money and brains tend not to work very well together.<\/p>\n<p><strong>Barry Ritholtz<\/strong>: So let\u2019s take some examples. Where does this evolutionary baggage that we\u2019re all stuck with? How does it lead us astray? Give us some examples.<strong>\u00a0<\/strong><\/p>\n<p><strong>Brian Portnoy<\/strong>: Well, let\u2019s talk about time now versus later. So we are as humans.<\/p>\n<p>We\u2019ve got the future. We\u2019ve got the past. We\u2019ve got the present. And, you know, we were raised, we grew up as a species in an immediate return environment. So there was a distant future, but When you\u2019re out on the savannah and you\u2019re trying to kill that animal and you\u2019re trying not to be eaten, you\u2019re really focused on the here and now. Well, if someone says, Hey, you know, you\u2019re 35 or 40 years old and we\u2019re going to put together a 30 year portfolio for you, that literally doesn\u2019t make any sense to who we are as a human species.<\/p>\n<p><strong>Barry Ritholtz<\/strong>: So let\u2019s talk a little bit about.\u00a0 and numbers. Why is it that we love a great story, but when we start thinking about probabilities and odds and numbers, our brains turn to mush?<\/p>\n<p><strong>Brian Portnoy<\/strong>:\u00a0 Yeah, it\u2019s just true that we were born as storytellers and not as calculators. We\u2019re not. particularly numerative. I say two plus two. You don\u2019t calculate that. You just know it\u2019s four. But if I give you something even slightly more complicated, we begin to, you know, stammer over, well, what would the answer be versus the way that we as a tribal, species developed many, many years ago, thousands of years ago, which was sharing stories. So the brain has evolved to love and cherish stories. It\u2019s the way that we live our lives.<\/p>\n<p>In fact, as we listen to new information, we watch TV or read the internet. We are processing. Enormous amounts of information and picking and choosing the bits that map to the stories that we already believe some psychologists might call this confirmation bias<\/p>\n<p>Numbers, they don\u2019t really compute literally and figuratively.<\/p>\n<p><strong>Barry Ritholtz<\/strong>: So you, you talked about telling stories as a group. Let\u2019s talk a little bit about humans as social primates and the tendency to do what the crowd does. Why is that a problem when it comes to stocks and bonds?<\/p>\n<p><strong>Brian Portnoy<\/strong>:\u00a0 Well, there\u2019s a word for that. It\u2019s called herding. But why do we herd to begin with? Well, you know, you asked me at the start, you know, what happened to get us going in this direction? Well, one was a focus on the here and now. Another was the focus on your local tribe, meaning that was a source of safety. First and foremost, but it also became a source of meaning and identity and community.<\/p>\n<p>So, humans, you know, we might think of ourselves as sovereign individuals, but in some ways before we become sovereign individuals, we were, we are born into tribal societies, tribal cultures, our identities are formed through those affiliations. And as a result, we want to be with everybody else. It\u2019s really uncomfortable to go against the grain.<\/p>\n<p>So fast forward a few thousand years to 24\/7 fast moving capital markets. When you see people running for the door or running into this room where something interesting is taking place, you\u2019re going to be like, Huh! Maybe I should go with them because there is safety in numbers, at least from a genetic wiring point of view.<\/p>\n<p><strong>Barry Ritholtz<\/strong>: It\u2019s so funny to say that as a kid, I grew up watching Mutual of Omaha\u2019s Wild kingdom. Yeah. And the aerial shot of the savannah and just thousands of wildebeest and they would always zoom in on that one limping wildebeest on the edge of the herd and you just knew that guy was about to get separated from the crowd and it wasn\u2019t going to be good for him.<\/p>\n<p><strong>Brian Portnoy<\/strong>:\u00a0 It was not. He was going to lose the race. I mean, we are wired for a dynamic that I simply called survive and thrive. Job number one every day is to stay alive. You don\u2019t necessarily need to thrive every day. You don\u2019t need to hit the jackpot every day. But you certainly need to stay alive. Because you get one, you got a one punch ticket.<\/p>\n<p>And, you got to stick around. So veering from the crowd, from a historical, from an evolutionary, from a psychological point of view, feels uncomfortable for a reason. Because our ancestors who did veer from the crowd, they\u2019re not really around to pass on their genes to us.<\/p>\n<p><strong>Barry Ritholtz<\/strong>: The ones that the lions culled from the herd, that genetic line ends there.<\/p>\n<p><strong>Brian Portnoy<\/strong>:\u00a0 That\u2019s the way evolution works. We are an adaptive species. So there are certain genes and instincts that are more by luck than by design. They land well in the world. And those are the ones that get replicated. Those are the genes that profligate through our system, our biological systems.<\/p>\n<p>And as a result, we, the human condition is what it is.<\/p>\n<p><strong>Barry Ritholtz<\/strong>: So let\u2019s talk a bit about. emotion. I\u2019m a big fan of Danny Kahneman\u2019s book, Thinking Fast and Slow. Why is it that our instinctual first reaction is this often over the top emotional reaction that gets our heart pumping or our breath quick? We begin to sweat. Why do we react that way?<\/p>\n<p><strong>Brian Portnoy<\/strong>:\u00a0 I mean, it comes back to this survival instinct, Barry. It\u2019s this hard wiring that, um, we need to survive. We are so good, if you think about it, so good at sensing danger. If you walk into a room, could be in your home or in the office, or if you\u2019re socializing with friends, if there\u2019s something in that environment that feels slightly off, you are so finely attuned to it, you are going to react. It\u2019s just who we are.<\/p>\n<p>And so when you talk about Danny Kahneman, one of my all time heroes, writer of Thinking Fast and Slow, inventor of behavioral finance with Amos Tversky. You absolutely have that quickening heart rate, the pulse is going up, you\u2019re sweating a little bit, because that is a natural biological reaction to a threatening environment.<\/p>\n<p>And the thing is a lion on the savannah and a red line on a stock chart actually trigger us in the exact same way in at some level. Danger is danger is danger.<\/p>\n<p><strong>Barry Ritholtz<\/strong>: So when we look at how humans have evolved and adapted, it seems life on the savannah was hard and our emotions get us excited, and that leads us to a fight or flight response, and that affects us in the modern xapital markets, tell us what this means for us today.<\/p>\n<p><strong>Brian Portnoy<\/strong>:\u00a0 One thing I\u2019d want to stress is that you sometimes hear, well, let\u2019s take the emotions out of investing. Well, it\u2019s sort of like saying, let\u2019s take gravity out of space. There, there, there\u2019s no way to get around it. We are emotional creatures. Emotions are actually sources of information so that we can navigate the world better.<\/p>\n<p>So there\u2019s nothing wrong with having an emotional reaction. Hey, my portfolio is declining in value. Am I still going to be able to retire comfortably? Those are totally natural, normal reactions. But what I\u2019d stress is that we get away from thinking of ourselves as irrational. By the way, irrational is an economist word for stupid.<\/p>\n<p>We\u2019re not stupid. Richard Thaler, one of the other pioneers in behavioral finance, has said that people aren\u2019t dumb, the world is hard. The world is very hard. We\u2019re processing a lot of information. It is complicated times. So let\u2019s not think of ourselves as irrational. Let\u2019s think of emotions as a source of information and strength, and think, well, we are normal, we are adaptive for a reason.<\/p>\n<p>It might land us in a difficult spot, but we can pull back from that, and with a little bit of self awareness, make better decisions.<\/p>\n<p><strong>Barry Ritholtz<\/strong>: Let me bring up something that Danny Kahneman said that I found so fascinating. He said, \u201cEven I fall prey to my own cognitive biases and emotional reactions.\u201d If someone as knowledgeable and just a pioneer in the space as Danny Kahneman is susceptible to emotions leading him astray, what hope do the rest of us have?<\/p>\n<p><strong>Brian Portnoy<\/strong>:\u00a0 We have a ton of hope, Barry. A ton of hope because we\u2019re not supposed to be automatons. It\u2019s an awesome thing that we are emotional. It makes life rich and colorful. It\u2019s just that we want to make sure that we appreciate that emotion is a language of with vocabulary and as we navigate markets, as we navigate our financial lives, these feelings of greed, joy, fear, envy, anger.<\/p>\n<p>One, they are normal, and two, we can use those as a jumping off spot to understanding how we want to approach a situation and make things better.\u00a0 When Danny Kahneman says, hey, I can\u2019t get rid of my biases, he\u2019s opening actually a really fantastic door for all of us to appreciate that this is just the way that we are.<\/p>\n<p>So the job here is not to change human nature. It\u2019s to understand human nature in ways that help us make better decisions in a very complicated world.<\/p>\n<p><strong>Barry Ritholtz<\/strong>: So I love, I love the way you\u2019re framing that. So, so let\u2019s take what\u2019s probably, one of the two most damaging emotions in, in finance, which is fear.<\/p>\n<p>We\u2019re recording this, markets have been a little wobbly the past couple of weeks, after a good run from the lows in 2022, things have kind of stumbled a bit. And the genuine risk for investors is after this goes on for a few weeks or even months, they just throw their hands up and say, \u201cI\u2019m not sleeping! I\u2019m not comfortable! Get me out!\u201d Everybody who works with clients has heard that phrase. \u201cI can\u2019t take it anymore. Get me out!\u201d Usually it\u2019s a great buying signal. Why is it that at, at lows, our panic reaches a crescendo?<\/p>\n<p><strong>Brian Portnoy<\/strong>: Well, it gets back to the fear instinct. The reason we feel fear is that we sense danger. We sense a threat to our security. It might not be our physical lives, way back in the day, but our financial lives, if they are under threat, well, maybe we can\u2019t afford to eat. Maybe we can\u2019t afford our mortgage. These feel very uncomfortable. They are legitimate emotions.<\/p>\n<p>One thing I\u2019d add, though, is that if we think of investing broadly, less as a game or a casino, something to be won, but as a tool in reaching our goals, we actually dampen down some of those harsher emotions that we might feel because we no longer are asking the question, Am I, you know, am I holding the right investments?<\/p>\n<p>How much money am I losing? We pivot to a more constructive question of, am I closer to or further away from my goals? And the goals actually serve as a really fantastic bridge from a cognitive point of view, from an emotional point of view, where you can really have a better conversation in your own mind. with your partner, with your financial advisor. It provides a context so that you\u2019re not being whipsawed by the daily machinations of the market. If you\u2019re paying too close attention to that, you\u2019re probably not playing the game that you should be in terms of long term financial well being.<\/p>\n<p><strong>Barry Ritholtz<\/strong>: Hmm. Really, really intriguing.<\/p>\n<p>So, so if I get this right, Emotions are natural. It doesn\u2019t mean we\u2019re dumb or stupid. It\u2019s part of who we are, but allowing your emotions to affect your thought process to lead to bad decisions, uh, that could cause bad investments, bad timing, and bad behavior, and that leads to bad results.<\/p>\n<p>But at the very least, if you\u2019re aware of your emotions and put them into some context and don\u2019t allow them to overly affect your decision making process, hey, you\u2019re, you\u2019re halfway there to a successful financial result. The bottom line Don\u2019t allow your emotions to get the better of you. That\u2019s just your wetware.<\/p>\n<p>That\u2019s just how you\u2019re built.<\/p>\n<p>You can listen to at the money every week. Find it in our Masters in Business feed at Bloomberg. com, Apple podcasts and Spotify. Each week we\u2019ll be here to discuss the issues that matter most to you as an infestor. I\u2019m Barry Ritholtz. You\u2019ve been listening to at the money on Bloomberg radio.<\/p>\n<p>\u00a0<\/p>\n<p>\u00a0<\/p>\n<p>\u00a0<\/p>\n<p>\u00a0<\/p>\n<p><iframe loading=\"lazy\" title=\"Investing Is Hard | At the Money\" width=\"640\" height=\"360\" src=\"https:\/\/www.youtube.com\/embed\/zh4-WrZlmik?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe><\/p>\n<p><noscript><iframe loading=\"lazy\" title=\"Investing Is Hard | At the Money\" width=\"640\" height=\"360\" src=\"https:\/\/www.youtube.com\/embed\/zh4-WrZlmik?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe><\/noscript><\/p>\n<div class=\"printfriendly pf-button pf-button-content pf-alignleft\"><a href=\"#\" rel=\"nofollow\" onclick=\"window.print(); return false;\" title=\"Printer Friendly, PDF &amp; Email\"><img decoding=\"async\" class=\"lazy lazy-hidden pf-button-img\" data-lazy-type=\"image\" src=\"https:\/\/cdn.printfriendly.com\/buttons\/printfriendly-button.png\" alt=\"Print Friendly, PDF &amp; Email\" style=\"width: 112px;height: 24px;\"\/><img decoding=\"async\" class=\"pf-button-img\" src=\"https:\/\/cdn.printfriendly.com\/buttons\/printfriendly-button.png\" alt=\"Print Friendly, PDF &amp; Email\" style=\"width: 112px;height: 24px;\"\/><\/a><\/div>\n<\/div>\n<p><script async src=\"\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><br \/>\n<br \/><br \/>\n<br \/><a href=\"https:\/\/ritholtz.com\/2024\/07\/atm-investing-is-hard\/\">Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>\u00a0 \u00a0 \u00a0Investing Is Hard with Brian Portnoy\u00a0(July 10, 2024) Why is investing so hard? It\u2019s because our brains have been trained, over thousands of years, to trust our fear instincts. In this episode, I speak with Brian Portnoy sits down with Barry Ritholtz to explain why humans aren\u2019t built to be good investors. Portnoy [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":62,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[3],"tags":[],"class_list":["post-61","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-ekonomika-finansai-bankininkyste"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/europaskolos.lt\/index.php\/wp-json\/wp\/v2\/posts\/61","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/europaskolos.lt\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/europaskolos.lt\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/europaskolos.lt\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/europaskolos.lt\/index.php\/wp-json\/wp\/v2\/comments?post=61"}],"version-history":[{"count":0,"href":"https:\/\/europaskolos.lt\/index.php\/wp-json\/wp\/v2\/posts\/61\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/europaskolos.lt\/index.php\/wp-json\/wp\/v2\/media\/62"}],"wp:attachment":[{"href":"https:\/\/europaskolos.lt\/index.php\/wp-json\/wp\/v2\/media?parent=61"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/europaskolos.lt\/index.php\/wp-json\/wp\/v2\/categories?post=61"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/europaskolos.lt\/index.php\/wp-json\/wp\/v2\/tags?post=61"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}