Behavioural Investing: Loss aversion

The Ritcey Report

May 25, 2017

The first in a multi-part series about a key investment issue.

In a recent blog post I introduced you to the idea of ‘behavioural investing’ – an awareness of the human biases that can often influence a client’s decision-making – and I said that I planned to examine these biases in more detail. Here goes.

Broadly speaking, these biases can be categorized into two segments: cognitive and emotional. An example of an investment-related cognitive bias is when investors are overconfident about the future and place undue importance on past investment outcomes. The disclaimer you read at the foot of advertisements for mutual funds, for example, supports this point. Emotional bias relates to the excessive influence of emotion on decision-making.
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Solid earnings suggest solid fundamentals

Here's what we're thinking

May 23, 2017

Global markets have generally grinded sideways over the past few weeks as they confronted a myriad of counter-balancing forces including a French presidential election, White House controversies including the firing of the Director of the FBI, oil prices oscillating in a 20% range, escalating tensions with North Korea, Chinese measures to deliver the domestic financial system, etc. Closer to home, Moody’s downgrading of Canada’s banks’ credit ratings capped off a period of general underperformance in Canadian stocks, heightening international focus on elevated household debt levels and over-heated real estate markets. In the U.S., a better-than-expected first quarter earnings season helped to remind investors of solid corporate fundamentals, powering the S&P500 and Nasdaq to new all-time highs.

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