Can You Banish The Irrational Investor In You?Are you an irrational investor? This might seem like a mean question, but please do not be offended. This, therefore, is something of a holy grail to professional investment managers. However, it turns out that vast numbers of private investors are not able to manage money in this way. This may seem contrary to logic, but it is true. Merton Miller, a defender of rational theory in investment, and a Nobel Laureate at the University of Chicago, once said about investors who do not use professional advisers: "For these investors, stocks are usually just more than abstract 'bundles of returns' of our economic models. Behind each holding may be a story of family business, family quarrels, legacies received, [and divorce settlements] ... almost totally irrelevant to our theories of portfolio selection." In other words, for many investors, they are themselves the enemy of rational investment decisions and superior performance and returns. This was not said to ridicule or admonish, simply an effort to state the reality. If this is true, and we can all probably understand that it is, a sound method of stock selection would be a mechanical system - preferably operated by another person - so that an individual can simply buy and sell without emotion. The returns earned would become numbers and no emotional attachment would be made to certain selections. If such an approach might help you and your investment returns, may we suggest that you visit the following page and learn how you too can banish your inner irrational investor:
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