Successful Investing Requires Coping With Some Discomfort


“Super investors take pain better than everybody else.”

Wesley Gray, CEO and CIO of Alpha Architect, made this observation at last week’s Financial Analysts Seminar, an annual CFA Institute event hosted with CFA Society Chicago. He was referencing the ability of successful investors to stick with a strategy.

Gray raised the point as part of a discussion about factor investing. Factor investing is selecting investments based on certain quantitative characteristics such as a low valuation (value), higher relative returns (momentum) or a smaller market capitalization (size). He could have easily made a comment about any other investment strategy.

Pain in the world of investing is incurring a loss. It can be a drawdown, a drop in the value of your portfolio. It can also be the loss of upside returns. Even if your investment is appreciating in price, the perceived loss of not being in a better-performing investment can be discomforting. Either way, loss is a powerful driver of human emotions and decision-making. Psychologist Daniel Kahneman says the pain of a loss exceeds the pleasure of a gain by a measure of 2:1. Continue Reading »

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Highlights from this month’s AAII Journal

AAII Sentiment Survey

Pessimism surged, rising above its historical average for the first time in nine weeks. More about this week’s results.

This week’s results:
  • Bullish: 36.1%, up 1.7 points
  • Neutral: 31.8%, down 9.4 points
  • Bearish: 32.1%, up 7.8 points
Historical averages:
  • Bullish: 38.5%
  • Neutral: 31.0%
  • Bearish: 30.5%

View the Sentiment Survey.

AAII Asset Allocation Survey

Cash allocations among surveyed AAII members fell to their lowest level since January 2000. More about the latest results.

July AAII Asset Allocation Survey results:
  • Stocks and stock funds: 67.9%, down 0.9 percentage points
  • Bonds and bond funds: 17.7%, up 2.7 percentage points
  • Cash: 14.5%, down 1.8 percentage points
July AAII Asset Allocation Details:
  • Stocks: 33.8%, up 0.2 percentage points
  • Stock funds: 34.1%, down 1.1 percentage points
  • Bonds: 3.9%, up 1.3 percentage points
  • Bond funds: 13.8%, up 1.3 percentage points

View the Asset Allocation Survey.

The Week Ahead

Though second-quarter earnings season is rotating to smaller companies, the calendar lists 33 S&P 500 member companies as being scheduled to report. Included in this group is one Dow component: Walt Disney Co. (DIS), which will report on Tuesday.

The week’s first economic reports will be June JOLTS report on Tuesday. Wednesday will feature the initial estimate of second-quarter productivity. On Thursday, the July producer price index (PPI) will be released. Ending the week, the July consumer price index (CPI) will be released on Friday.

Three Federal Reserve officials will make public appearances. St. Louis president James Bullard will speak on Monday. Minneapolis president Neel Kashkari will speak on Monday and on Friday. New York president William Dudley will speak on Thursday.

The Treasury Department will auction $24 billion of three-year notes on Tuesday, $23 billion of 10-year notes on Wednesday and $15 billion of 30-year bonds on Thursday.



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