Author Topic: My personal disposition effect  (Read 2724 times)

Rod

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Re: My personal disposition effect
« Reply #10 on: October 07, 2017, 11:30:00 AM »
A very interesting topic. I don't think that you can really automate selling with a one-size fits all rule like "sell if it drops 20% after buying". A rule like that will eliminate anchoring biases. But it also eliminates intelligent decision making. I think that's a losing deal. If you want to sell your "losers", you need to decide what a "loser" is. A loser isn't a stock that has dropped, it's a stock that has dropped and its prospects are worse than you originally thought. The former you want to hold or buy more. Only the later would you want to sell.

My favourite way of combating sunk cost fallacy with a declining stock is to ask myself if I would buy it now if I didn't already own it. Or would I recommend someone in my family buy it at the current price. That usually tells me what I need to do. If selling is warranted it's hard to carry through but I've managed to do it.


Jurgis

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Re: My personal disposition effect
« Reply #11 on: October 07, 2017, 11:52:33 AM »
So when BRK dropped 50% (twice so far) investors should have sold it immediately? You know "weed" and all that...  ::)

John Hjorth

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Re: My personal disposition effect
« Reply #12 on: October 07, 2017, 11:58:00 AM »
If you want to sell your "losers", you need to decide what a "loser" is. A loser isn't a stock that has dropped, it's a stock that has dropped and its prospects are worse than you originally thought. The former you want to hold or buy more. Only the later would you want to sell. ...

Thank you, Rod.

Very good post, - at least to me. It has a lot do to with ones own line of thinking, related to the thesis, at the point of time when buying in to the stock. Is the thesis still intact, or is it not.

Confirmation bias tends to generate thesis drift inside ones brain. The brain starts reaching out for straws, if one let it. Personally, I'm a master of that particular discipline.
”In the race of excellence … there is no finish line.”
-HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai

DooDiligence

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Re: My personal disposition effect
« Reply #13 on: October 07, 2017, 12:24:32 PM »
Tweet by Ian Cassel referring to a telephone conversation between Mr. Buffett and and Mr. Lynch on the topic. [Thank you for guiding me to it via your retweet, DooDiligence.]

Glad for at være til hjælp (did Google translate get that right?)
abc | abev | aapl | bbh | brk.b | cri | cvs | dva | dis | ew | ffxdf | gpc | mo | nvo | sftby | vde

8 months left in the BRK.B 1st of the month DCA program (hoping 4 a selloff 2 go all in!)

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John Hjorth

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Re: My personal disposition effect
« Reply #14 on: October 07, 2017, 12:58:34 PM »
Yes, DooDiligence, - even the "æ".
”In the race of excellence … there is no finish line.”
-HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai