Your Brain versus Your Gut

How to write an investment plan

Investing money without first writing an investment plan is like driving off in a random direction to an arbitrary destination with no map or gps.  Why would you do that? But you have no idea how to write an investment plan, right? Well, it’s not very complicated. First, answer these questions: Who are you? What are you saving money for? When will you need it? Now you’re ready to write your plan. For reasons explained below, I recommend writing your investment plan in the third person, as if it were someone else’s. For example: John and Sonia Blaine’s Investment Plan […]

Risk: Bad Behavior

In an earlier blog ( I tried to clarify one meaning of  “risk,” by substituting the term “bad outcome.” Now, some bad outcomes are beyond our control; for example, we can’t dictate what the stock market will do. But many savers suffer bad outcomes as a direct result of their own behavior. And if we don’t learn how to control our instinctive responses to booms and busts, we’re not likely to earn what we could and should in our investment portfolios. So here I’m going to focus on bad behavior as another form of risk we need to manage. Bad Behavior […]

Bull Market or Just Bull?

When NBC Nightly News devotes precious minutes to report on the rising stock market, I get twitchy. Surely this is a bad sign, a contrarian indicator? Indeed, US equities have been on a tear, resulting in one of the strongest Januaries on record, taking major market indexes close to their all-time highs. Sentiment Trader, an online newsletter that analyzes market trends, reports that stocks have generally continued higher at least for several months after such a strong kick-off. However, they also note that optimistic sentiment has by some measures hit levels seen only three times in the past 25 years, […]