Barry Ritholtz, Chairman and CIO of Ritholtz Wealth Management and author of How Not To Invest, shares profound insights on minimizing errors to enhance financial success. He discusses the psychological aspects of investing, emphasizing self-awareness and emotional resilience. Ritholtz highlights the importance of a long-term perspective, especially for retirement planning. He also explores financial innovations like ETFs and the impact of technology on trading behavior, all while offering candid anecdotes from his career to illuminate key lessons learned.
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Bias Blind Spot
Barry Ritholtz realized his own bias blind spot while watching a basketball game.
He was objective because he didn't care who won, yet criticized the refs like any other fan.
question_answer ANECDOTE
Capitulation
Jim O'Shaughnessy recounts advisors capitulating during market extremes despite knowing better.
One advisor insisted "it's different this time" during the 2009 financial crisis, ignoring data and advice.
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Managing Client Expectations
Proactively discuss market downturns with clients before they happen, not during.
Manage expectations, especially after good years, and show clients historical market data.
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In 'How We Know What Isn't So', Thomas Gilovich explores how cognitive biases and social influences distort our perceptions of reality. He provides examples and research findings to illustrate how these biases affect our judgments and decisions, offering insights into more effective analysis and action.
How Not to Invest
The ideas, numbers, and behavior that destroy wealth—and how to avoid them
Barry Ritholtz
Winning the loser's game
Timeless Strategies for Successful Investing
Charles D. Ellis
In 'Winning the Loser's Game,' Charles D. Ellis explains that investing has become a 'loser's game' where the outcome is determined by the mistakes of the loser, rather than the skills of the winner. Ellis advocates for a focus on developing and adhering to wise and appropriate investment policies, emphasizing the importance of understanding client needs, avoiding high fees, and investing for the long term. The book includes updated chapters on bond investing, investor behavior, and the impact of technology on investment decisions, while reinforcing core principles of successful investing such as indexing and reducing costs.
My friend Barry Ritholtz has spent his career being an astute market observer, investigating behavioral finance and data analytics. He runs Ritholtz Wealth Management which has been named ETF Advisor of the Year, Financial Times Top 300 Advisors, and one of America’s fastest-growing RIAs. He’s also the host of Masters in Business, Bloomberg Radio’s most popular podcast (50+ million streams/downloads), which he started way back in 2014.
In his new book, How Not To Invest, Barry emphasizes how avoiding rookie mistakes can significantly help you do better financially. He blends engaging stories with data-driven insights, and explores overlooked aspects of behavioral finance, psychology and the market. Reading his book is like having a casual drink with an experienced, wise, and honest friend.
I hope you enjoy this conversation as much as I did. For the full transcript, episode takeaways, and bucketloads of other goodies designed to make you go, “Hmm, that’s interesting!”, check out our Substack.
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