Alec Hogg: Expecting to profit from trading shares? Forget it.

by Alec Hogg

Having whizzed through Ashlee Vance's biography on Elon Musk, I've jumped back into one of the best books I've ever read. Daniel Kahneman's "Thinking, fast and slow" takes focus, but like an old treasure chest gets better the deeper one goes.

Yesterday's gem comes from Chapter 20 which contains a section that should be prescribed reading for private investors. Kahneman refers to an analysis of 163,000 trades by 10,000 individual investors by a former student of his, UC Berkley professor Terry Odean.

The shares private clients sold actually did a lot better than those they used the money to buy into. On average by 3.2 percentage points a year. Says Kahneman: "For the large majority of individual investors, taking a shower and doing nothing would have been a better policy than implementing ideas that came into their heads." Think that one through next time the trading mood takes you.

From Biznews community member Matthews Letlape

Yes, indeed that is a critical question facing the elite of our country. Recently the rand surpassed R20 to the British Pound, so one is very very afraid to contemplate the situation after 10 years. Are we going to see humans consuming humans? Is hard to answer that question, but mayhem is knocking on our doors for sure. Brilliant Assertion Mr Hogg.

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