Washington Post: Why politics and investing don’t mix

February 7, 2011 9:00am by Barry Ritholtz

I had a column published in Sunday’s Washington Post Business Section. Its titled “Why politics and investing don’t mix.” Here is an excerpt:

“I thought I’d begin our conversation about investing by rocking your most cherished beliefs. Many of you are active in party politics, work for government or are involved in related fields. Well, I have some bad news: Your politics are killing you in the markets.

In my work, I use behavioral psychology, statistics, cognitive biases, history, data analysis, mathematics, brain physiology, even evolution to make better investing decisions. Indeed, these are all key to learning precisely what not to do. While making good decisions can help your portfolio, avoiding bad ones is even more important.

We humans make all the same mistakes, over and over again. It’s how we are wired, the net result of evolution. That flight-or-fight response might have helped your ancestors deal with hungry saber-toothed tigers and territorial Cro Magnons, but it drives investors to make costly emotional decisions.”

I think you will be surprised by the entire piece . . .

Source:
Why politics and investing don’t mix
Barry Ritholtz
Washington Post, Sunday, February 6, 2011; G06
http://www.washingtonpost.com/wp-dyn/content/article/2011/02/06/AR2011020600114.html

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