Morgan Housel delivered an excellent keynote talk about market risk and investor behavior. His talk built on the major themes from his recent book: “The Psychology of Money”. Morgan’s presentation was followed by a great Q&A session with Board Chair Heather Young.
A few takeaways from Morgan’s thought-provoking talk:
- Risk and happiness are by-products of individual expectations
Morgan noted that people were happier in the 1950s…
not because of peak economic prosperity,
but because of low wealth disparity and positive investor expectations
- Risk is biased by each individual’s unique experiences
There is a large diversity of experiences and expectations across market participants
For example, teens/20s growing up in the 1950’s
had a very different market experiences and therefore have different risk perspectives
than their younger counterparts growing up in the 1970’s
- Risk is what is left over when you think you have thought of everything
A truly powerful statement that encourages much needed introspection
As such, investors need to set their expectations and awareness accordingly
Overall, market psychology is a major, under-discussed driver of market behavior. Morgan’s comments brought recognition and improved clarity to these effects. Check out Morgan’s book for more information on these important topics.
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