William J. Bernstein Quotes

There are no safeguards that can protect the emotional investor from himself.

The average investor does significantly worse than a simple index... It's literally because of the way our brains are wired.

When reviewing one's portfolio, it is important to be aware of common mental mistakes that may lead to bad decisions. The most powerful is commitment bias, which, as manifested in investing, is the tendency to fall in love with one's stocks.

It's human nature: for most investors, the pain of stocks going down is more tangible than the joy of when they go up. The common impulse is to do something - anything - to minimise the pain.

I started in business journalism from the outside, so when I started writing about markets and business, I was struck by the fact that markets seemed to work well even though people are often irrational, lack good information and are not perfect in the way they think about decisions.

Doctors are human animals. They want to be loved, they are tribal, they instinctually favor stories over scientific evidence, they make mistakes, and even small gifts make them susceptible to being biased.

During periods of extreme fear or greed, you don't have the proper balance between those two to generate market efficiency and you get extremes in behavior.

You have a natural tendency to want an emotionally satisfying tale - and to make investments based on that - despite times when the actual data may be telling you something different.

If owning stocks is a long-term project for you, following their changes constantly is a very, very bad idea. It's the worst possible thing you can do, because people are so sensitive to short-term losses. If you count your money every day, you'll be miserable.

While neurological studies have tried to identify components responsible for fear and greed, the impact on finance is less clear.

We must recognize our own behavioral errors. To be blunt, you are not likely to become a cognitive Zen master anytime soon. But a little enlightenment could keep you from making some common investing errors.

I've always been more comfortable making my decisions from the subconscious level, or more emotionally, because I find it is more truthful to me; Intellectually, I don't think like that because I get uncomfortable.

Hundreds of investors ask me questions each year about the dilemmas they confront. Their worst problem? Uncertainty. They are traumatized and become emotional or confused to the state of inaction. Even worse, they try to solve a short-term problem in a way that hurts them financially in the long run.

When it comes to investing, you are your own worst enemy.

If you see voters as rational, you'll be a terrible politician. People are not wired to be rational. Our brains simply evolved to keep us alive. Brains did not evolve to give us truth. Brains merely give us movies in our minds that keeps us sane and motivated. But none of it is rational or true, except maybe sometimes by coincidence.

Yes, the investor is often his own worst enemy. Yes, the marketing colossus known as the mutual fund industry provides the weaponry which enables investors to indulge their suicidal instincts. No, the fund industry was hardly an innocent bystander in the market boom and the subsequent carnage. "We have met the enemy and he is us"... all of us.

The markets are moved by animal spirits, and not by reason.

You put too much stock in human intelligence, it doesn't annihilate human nature.

The investment business has taught me – increasingly as the years have passed – that people, especially investors (and, I believe, Americans), prefer good news and wishful thinking to bad news; and that there are always vested interests to offer facile, optimistic alternatives to the bad news.

You are 100% emotional in everything you think, feel and decide. You decide emotionally and justify logically.

First with the head, then with the heart.

Who should know better than a cosmetician that human beings are less than rational creatures?

Well the open-outcry auction is just made to turn the brain into mush: you've got social proof, the other guy is bidding, you get reciprocation tendency, you get deprival super-reaction syndrome, the thing is going away... I mean it just absolutely is designed to manipulate people into idiotic behavior.

When emotion supersedes reason ... gullibility must follow.

A lot of people got in at the wrong time. A lot of people did very well and some people said, "This is it. I'll never get back in again." And they maybe meant it, but they probably got back in again anyway.