People are really crazy about minor decrements down. Huge insanities can come from just subconsciously over-weighing the importance of what you’re losing or almost getting and not getting…

— Charlie Munger

One of prospect theory’s most important contributions to finance is loss aversion, the idea that for most people, losses loom larger than corresponding gains. The empirical evidence suggests we feel losses about two to two-and-a-half times more than we feel gains. Loss aversion is a clear-cut deviation from expected utility theory.”

— Michael Mauboussin

So nature has kind of tuned us to look at the negative side…

— Dan Ariely

Why does cash feel so different? The agony of parting with our money has to do with the saliency of, do we see this money going away? And it has to do with the timing of whether the money is going away at the same time we’re consuming.” “For example, we find that if you have a coin flip that you have a 50% chance of making $1,100 and a 50% chance of losing $1,000. The expected value is positive, but we don’t think of it as positive. We think, “Oh, my goodness. If I lost $1,000, I would be very miserable. If I won $1,100 I would be happy, but it wouldn’t offset it, so let me not take that bet.” Now, we think that the reason is evolutionary. If you think about nature, if you get something good (like you get to eat more food and so on) that’s a good thing, but if you do something bad, you can die. So nature has kind of tuned us to look at the negative side because if you get a bit more food, a bit more money or whatever, there’s a positive expected value but it’s limited. Whereas on the negative side, you can lose a lot. So because of that we just attune more to losses.”

Fear has a greater grasp on human action than does the impressive weight of historical evidence

— Jermey J. Siegel

No one is asking you not to feel the fear, because there are  very few of us who ever actually become immune to the emotion. You have to be who you are, and you have to fell what you feel. You simply have to refuse to act on the feeling.”

— Nick Murray from ‘Simple Wealth, Inevitable Wealth” p. 71

I promise you that, if the price of your house were listed everyday in the newspaper, you’d have been scared into selling it two or three times in the last twenty years. But it’s not, so you didn’t — and look where the price is compared to twenty years ago.”

— Nick Murray from ‘Simple Wealth, Inevitable Wealth” p.75

Think of it this way: By entertaining some mindful decision-making about your investments, you just might eliminate any fears and anxiety you may have about your financial future. How’s that for a payoff? …

Dividends still don’t lie p. 6

The three activities [for successful investing] are nothing more than being mindful about your investments and investment decisions. You put thought and consideration into other critical areas of your life, why shouldn’t you do the same about your investments? Think of it this way: By entertaining some mindful decision-making about your investments, you just might eliminate any fears and anxiety you may have about your financial future. How’s that for a payoff?”

The performance-oriented approach has three areas of focus: understand what you need so you can establish achievable goals; make investments with the highest probability for meeting those goals; and limit taxes and expenses.