George Costanza, Benjamin Graham and the human bias

There’s an episode of the 90’s sitcom Seinfeld where George realises that every decision he has ever made has been wrong, and his life is the opposite of what he feels it should be. He remedies this situation by doing the opposite of whatever his natural impulse is and, by the end of the episode’s 22-minute run time, he’s turned his life around. While comedic license is taken, George’s experience highlights a truth about people: our instincts can mislead us.

This is especially true in financial markets, where the simplicity of “buy low, sell high” is often undermined by human behaviour. Benjamin Graham, the father of value investing, noted that booming markets tempt investors to buy high, while falling markets provoke them to sell low-precisely the opposite of what logic dictates. Like George, investors’ instincts can lead them astray, even when they know better. As Graham famously observed, “The investor’s chief problem, and even his worst enemy, is likely to be himself.”

In this article Talaria Co-CIO Chad Padowitz discusses behavioural bias, especially when it comes to investing, and how Talaria’s process exploits these as part of its investment process.

Read the full article in FS Super.