Sublime

There is reasonably strong evidence for what Thaler calls No Free Lunch—it is difficult (although not literally impossible) for any investor to beat the market over the long-term. Theoretically appealing opportunities may be challenging to exploit in practice because of transaction costs, risks, and other constraints on trading. Statistical pattern

My own theory is that, in the real world, people do not want the mathematically optimal strategy. They want the strategy that maximizes for how well they sleep at night.

The economists wrote: “Our findings suggest that individual investors’ willingness to bear risk depends on personal history.” Not intelligence, or education, or sophistication. Just the dumb luck of when and where you were born.

If I had to summarize my views on investing, it’s this: Every investor should pick a strategy that has the highest odds of successfully meeting their goals. And I think for most investors, dollar-cost averaging into a low-cost index fund will provide the highest odds of long-term success.

Look at poor Frank, a contestant on the Dutch version of Deal or No Deal. He gets off to an unlucky start by immediately eliminating some of the most lucrative briefcases. After six rounds, Frank has only one valuable briefcase left, worth five hundred thousand euros. The Banker offers him #102,006, about 75 percent of a perfectly fair offer. Frank

If such an event actually happens in your life, you should know that a large industry of “structured settlements” exists to provide certainty at a hefty price, by taking advantage of the certainty effect.

efficient-market hypothesis. The central claim of the theory is that the movement of the stock market is unpredictable to any meaningful extent. Some investors inevitably perform better than others over short periods of time—just as some gamblers inevitably win at roulette on any given evening in Las Vegas. But, Fama claimed, they weren’t able to m

Mental Accounting. George is worried about his finances—as evidenced by his decision to save money on coffee in the morning—yet nonchalantly spends $200 at the casino. This contradiction occurs, in part, because he puts that casino spending into a different “mental account” than the coffee. By taking his money and converting it into pieces of plast