Thursday, January 27, 2005

[muse] Stock investing and horse racing

I have long believed, that investing in individual stocks, is like betting on horse racing.

- You get past race/earning results, which give you the illusion of knowing future performance.
- You find all kinds of information about the horse/company, which give you the illusion of knowing what the horse/company is up to.
- The performance of the horse/stock can flip and change overnight (often followed by SEC investigation), without any prior indications.
- And finally, everyone talks about how they won. No one ever talks about their losses.

Yet despite my firm belief in this, I haven't liquidated my shares in individual stocks, and am still constantly tempted by Why?

Maybe it's because I like to gamble? Well, no, not really. I do like making small bets on football games, but that's only because that makes watching game so much more enjoyable when you are passionately cheerleading for someone. That's about it.

However I found this article today that sure explains a lot. About what we choose to remember, what thrills us, and how we tend to make long-term decisions based on short-term data. Interesting read.