‘Give yourself a D-minus for behaviour’

“There is one principle a man must follow if he wishes to succeed, and that is to understand human nature”

Henry Ford, founder Ford Motor Co

This educational article explores a whole range of behavioural traits and biases that can trip investors up and promotes the value of an unemotional, disciplined and systematic approach to investing.

Key messages:

  • Human nature is a big impediment to successful investing as well as success in other areas of our lives
  • Deep-seated evolutionary traits and behaviours leave us prone to making emotionally driven decisions, often using short-cut approximations for reality
  • Our emotional selves tend to overpower logical selves
  • Recognising a number of critical blind-spots and blinkers provides a mirror to reflect on our behavioural weaknesses as investors
  • The consequence of our bad behaviour can be considerable and there is plenty of historical evidence to demonstrate it
  • Do not despair, a discipline and systematic investment process can help to trump evolution and to take much of the emotion out of investing, thereby improving the chances of a successful investment experience.

Produced in conjunction with Albion Strategic Consulting, September 2011.