독후감) Why smart people make big mistakes and how to correct them

 

This book is about behavioral psychology in investment, and suggests that how we prevent possible mistakes. Some suggestions seem reasonable meanwhile others are out of date since the book's publish year is 2010 which is 10 years ago. Yet there are some core guidelines for novice investors like me. Here, I list some considerable suggestions from this book and how I altered my financial plan.

1. Every dollar spends the same. Keep in mind mental accounting.
: As the suggestion from this chapter, I also sent small percents of wage the specialized designed account for shopping

2. Losses hurt you more than gains please you.
: It is a human nature that human dislike losses than gains, which is why people sell out their stocks when charts go down. In 2020, there is a consensus that buy when stock chart is down. So modern people is a bit stronger than before.

3. Money that has spent is money that doesnt matter (sunk cost) Past mistakes shouldnt lead you to make future ones
: this is what I should keep in mind. There is stock I bought cheap. I wanted to buy more but the price became a bit higher. I didnt want to buy with expensive price so I hold my buying. Now it became more expensive. If I bought it before, I wouldnt spend time and energy to keep following the chart. Thus, on Monday, I will buy the stock for sure.


4. The way you frame decisions profoundly influences the choice.
: this is very nice habit that asking opposite way question in general. From "what will you do" to "what will u not do" I will write it down and try to ask myself everyday.


5. All numbers count.
: Sum up matters. So do not sell stocks often and be aware of spending small moeny like takeout coffee and snacks in daily life.

6. Your confidence is often misplaced
: Be humble and review the mistakes

7. Share investment decisions seeking advices and critiques

8. Less check your investment, less emotionally react. Emotion affects your decision

9. No insurance
: I agree some part. I have seen many people having trouble with insurance company in a long term because of their insurance. For instance, there are many different stages in cancer. Most of people find their cancer in very early stage, which insurance company do not pay back for that.

10. Pay off credit card debt with emergency funds
: check its interest rate and pay off higher rate. Emergency funds usally dont give high rates. So pay off debt if you have it.

11. Invest on index fund
12. Diverse your investment
13. Review your asset