Biased people against stocks

[tech/a]

So what you're saying is that people shouldn't have bodily autonomy, and must live in case it upsets you or someone else? That's pretty selfish.

In either case, if mental illness is involved you can't ascribe their actions to a rational thought process.

Back on topic -- people are just scared of what they don't understand. Generally they won't seek better understanding, and often even after correcting their understanding their fears will remain.

Understanding and Implementation may well be streets apart!
Oh and I doubt the case Knobby described was mental illness.
Lost the families life savings and couldn't face the music.
He knew WHY-----didn't want to face the implementation.

 

[Knobby22]

Well put. he had no history of mental illness.

He would have been more help to the family by admitting he stuffed up, restarting and doing his best as a husband and father to his 6 year old boy... that would have been the gutsy route.

Instead he caused additional psychological damage to his family and left them having to deal with his burial. ... just because he lost some pride. As I said selfish.

 

[tech/a]

Well put. he had no history of mental illness.

He would have been more help to the family by admitting he stuffed up, restarting and doing his best as a husband and father to his 6 year old boy... that would have been the gutsy route.

Instead he caused additional psychological damage to his family and left them having to deal with his burial. ... just because he lost some pride. As I said selfish.

Strange as it may seem ---I actually welcome challenging times.
I've learnt more overcoming adversity than bathing in the sun of success.

 

[CanOz]

We're all brought up differently with different beliefs and values that evolve over time. We can't imagine what that individual felt at the time, how much help they did or didn't receive...To comment on it really doesn't serve anyone any good but ourselves....

 

[tech/a]

We're all brought up differently with different beliefs and values that evolve over time. We can't imagine what that individual felt at the time, how much help they did or didn't receive...To comment on it really doesn't serve anyone any good but ourselves....

Mine is a personal view. Self serving??? Maybe.

To comment on it really doesn't serve anyone any good but ourselves

Not so sure about that.
My and others comments might make someone consider others-------
He--you--I--wont be the first or the last to have tremendous hardships thrown at us in life.
Half the problem in my view (Again personal) is that not
enough people speak their mind.

 

[pavilion103]

I agree that the action to do such a thing elevates the needs of the individual above that of his family. I think it is terrible.

Having said that we ultimately don't know what was going on in his mind. Maybe things that we can't comprehend or a level of delusion and hopelessness that ultimately completely impaired judgement.

I have someone very close to me who suffers from depression. Total and utter hopelessness. When in a "normal" state of mind he is a compeltely different person to when the depression completely overtakes and overwhelms him. I have personally seen a transformation that scares me. It can't be taken lightly.

I used to be of the view of "suck it up" when people took and easy option. Now I tend to think that most times people will take a "cop out", but also sometimes it can be beyond a level that can be understanded by most.

 

[Wysiwyg]

Strange as it may seem ---I actually welcome challenging times.
I've learnt more overcoming adversity than bathing in the sun of success.

So true. The school of hard knocks have many been to.

 

[tech/a]

Back to the Stock Bias.

I think we all agree that lack of understanding prior to entering the market
stops many from doing so.
Then lack of understanding more in respect of trading itself and the basics of risk mitigation
once they take the "Plunge".

Yet the same could be said for people in the housing market.

I think however those who fail dismally are those who basically "Gamble" in the stock market.

But If I use this comparative analogy with say horse racing.

(1) I can place a bet worth $100000s with a click of the mouse.
(2) If I think my race is a year long and I don't like where I'm placed in a month
I can get out of the bet before the end of it---with a profit or loss
(3) If the race is going well I can add to my bet before the end of it!
(4) If I see that the race is now looking better for me I can re enter it!
(5) I can take some of my profit or loss before the end of the race.
(6) At the end of the race its very UNLIKELY I'll lose my total initial stake!
(7) I can make money if my horse runs in the opposite direction. (Not available on all horses)
(8) In some cases my horse will pay me during the race just because I'm on it!
(9) I can vote to change Jockeys---during the race!!

How'd you like to do that on the Melbourne Cup!

Now to me that's a pretty good bet!

 

[CanOz]

I have someone very close to me who suffers from depression. Total and utter hopelessness. When in a "normal" state of mind he is a completely different person to when the depression completely overtakes and overwhelms him. I have personally seen a transformation that scares me. It can't be taken lightly.

I used to be of the view of "suck it up" when people took and easy option. Now I tend to think that most times people will take a "cop out", but also sometimes it can be beyond a level that can be understood by most.

...totally agree

 

[Smurf1976]

Mental illness etc - having seen someone suffer a complete breakdown, I take the whole issue far more seriously than I once did. Problems affecting the mind are every bit as real an illness as a broken leg, cancer or heart attack. Practically everyone is a potential victim under the right circumstances - you can reduce your chances of suffering a mental illness just as you can reduce your chances of getting cancer but there are no certainties.

Lack of understanding and fear - it's the same with everything, not just the market. I hear it all the time in the context of work. Solar power doesn't work during winter in Tassie (fact = yes it does if designed properly), you can't heat a house with an air-conditioner when it's snowing (fact = yes you can with the right system) and hydro power isn't reliable either (fact = has a better reliability record than coal or nuclear).

It's the same with anything. Most people have a very limited understanding of any given subject, that being an inevitable consequence of living in an increasingly complex world. 200 years ago it was plausible that one individual could understand most machines, manufacturing processes, agriculture etc in use at the time since there wasn't a huge amount to grasp.

But things have changed, and done so in a relatively short space of time. 35 years ago cars were still relatively straightforward and most people could, if they wanted to, understand how all the parts worked and make repairs as needed. But today, very few people could really explain properly how it all works and feel confident to make repairs. In the space of a single generation, cars have gone from "not that difficult" to "completely beyond the abilities of most" to fully understand.

I could post a million other examples probably. We're living in a world where most people understand very little of what goes on around them and that trend continues to increase. People are naturally frightened of things they don't understand, especially when their limited knowledge tells them that some sort of danger is involved. Hence people won't DIY maintenance on their 5 year old car and they won't go near the stock market. They're frightened of costing themselves big $ messing about with something they don't really understand.

 

[qldfrog]

And I would like to say that I find it hard to believe that anyone actually "understand" the stock market;
I would say I managed to learn most of the mecanisms involved, I know the theorical knowledge between bond and market, gold, inflation, options, etc
yet as everyone, I can not judge mass reaction (the psychological aspect of the market) nor do I know in advance what the RBA next move will be;
Posteriory, I can give an explanation of why this or that happens, you find pages of "business news" doing that but the truth is:
in the stock market, at least on the short or medium term, the same inputs may give you two very different outcomes.
If anyone was "understanding" the stock market fully, he/she would be billionaire very quickly
So you 9and I) manage risk, value, or even TA to put more odds on your side, limit risk leverage gain etc but the unknown remains.
While fully involved, I do understand the reluctance of most to jump in;
It is not a casino(you and I know it: we are here and "aware"), but for most, this is what it will still look like.

 

[Value Collector]

And I would like to say that I find it hard to believe that anyone actually "understand" the stock market;
I would say I managed to learn most of the mecanisms involved, I know the theorical knowledge between bond and market, gold, inflation, options, etc
yet as everyone, I can not judge mass reaction (the psychological aspect of the market) nor do I know in advance what the RBA next move will be;
Posteriory, I can give an explanation of why this or that happens, you find pages of "business news" doing that but the truth is:
in the stock market, at least on the short or medium term, the same inputs may give you two very different outcomes.
If anyone was "understanding" the stock market fully, he/she would be billionaire very quickly
So you 9and I) manage risk, value, or even TA to put more odds on your side, limit risk leverage gain etc but the unknown remains.
While fully involved, I do understand the reluctance of most to jump in;
It is not a casino(you and I know it: we are here and "aware"), but for most, this is what it will still look like.

I don't think that when people say they "Understand" the market, that they are claiming to know everything that will happen.

eg, Some one can say they understand the rugby league, that doesn't mean they are claiming to know the outcome of every game before it happens.

________

The fact that a lot of people see it as a casino is unfortunate,

 

[tech/a]

I don't think that when people say they "Understand" the market, that they are claiming to know everything that will happen.

eg, Some one can say they understand the rugby league, that doesn't mean they are claiming to know the outcome of every game before it happens.

________

The fact that a lot of people see it as a casino is unfortunate,

To add

I personally don't think you have to know everything.
A basic understanding of micro and macro economics helps.
But I trade without knowing anything about a stock other than it's code.
(when systems trading) even discretionary trading.

 

[burglar]

... The fact that a lot of people see it as a casino is unfortunate,

computers
internet
dot.com bubble

tech wreck
commodity boom
global financial crisis

The market is more like a casino than ever it was.

 

[qldfrog]

I disagree on the casino analogy:
I bet but I manage my risks I can not go to the roulette and p;ay $200 on red yet take an insurance to cover part of my losses if I loose; options allows that on the share market
But I agree that more than ever before (or at least more than ever since I was a teenager, markets have a huge volatility

 

[barney]

Problems affecting the mind are every bit as real an illness as a broken leg, cancer or heart attack. Practically everyone is a potential victim under the right circumstances

Most people have a very limited understanding of any given subject, that being an inevitable consequence of living in an increasingly complex world.

We're living in a world where most people understand very little of what goes on around them and that trend continues to increase.

Good post Smurph ..... The sooner that we (humans) come to terms with our own mortality and insignificance in the overall scheme of the Universe, the more likely we will eliminate a lot of the worlds issues. Do I think that is likely to happen?? Nah, man is pretty much doomed in the long term

Suicide is tragic, especially when "caused" by a mistaken belief that losing ones material wealth makes you a failure! .... The failure is actually in the belief that material wealth even mattered in the first place

Peer pressure is the cause of many suicides ... rather than have the gal to judge some poor soul for feeling the ultimate pressure to terminate their existence, we should perhaps feel guilt that our own misguided sense of self worth may have actually contributed to their decision!! (and I include myself in that summation)

 

[DeepState]

And I would like to say that I find it hard to believe that anyone actually "understand" the stock market;

I don't understand how my computer works, or what goes on in the cloud. But I can use it, and it works. My knowledge about the computer and the cloud is thus adequate for my purposes.

I have no idea how to appropriately price a CDO-squared tranche with embedded copula functions. I can trade them, easy. I understand them enough to describe them and to even write out the formulation (after some-one else wrote it down for me first). But my knowledge is inadequate for the purpose of intelligently taking risk to make profit. Perhaps my knowledge is at the limit of what is humanly achievable.

We do not need to fully understand something to use it. But if our understanding is insufficient, more bad stuff tends to happen than would otherwise be the case. That gap differs according to the characteristics of the thing you are trying to understand. The problems we are trying to understand are nowhere near identical in nature and the consequences of error are massively different. Having a population average ability to cut a turkey is rather different to having a population average ability for brain surgery.

In the case of the markets, I too doubt that anyone could possibly understand it sufficiently, achieving the kind of deterministic knowledge purported by Qldfrog's fellow countryman Pierre-Simon Laplace, to eliminate the adverse outcomes arising from the Rumsfeld-ian known unknowns or unknown unknowns...because we don't know or understand it enough to properly manage it. But, for some, their knowledge is good enough for most circumstances and they have a working knowledge about the consequences of the gap in the understanding they have and what might be the level required to eliminate the risk. For others....well, maybe they don't understand enough that they don't understand enough. For them, a casino might actually be safer.

 

[DeepState]

I disagree on the casino analogy:
I bet but I manage my risks I can not go to the roulette and p;ay $200 on red yet take an insurance to cover part of my losses if I loose; options allows that on the share market
But I agree that more than ever before (or at least more than ever since I was a teenager, markets have a huge volatility

Actually, the roulette example is a binary option. By playing roulette, taking enough spins, you can generate whatever option payoff you want with the bets available to you at the casino. This approach is actually how options are priced in practice....Black-Scholes-Merton model.

Markets are worse than a casino. In the casino, you know the odds and you know the rules of the game and these don't change. There are always cheap buffets around too. Seeing the markets as a casino is putting the casino is a good light. The increasing complexity of the financial markets and economies is making this gap more wide with time.

 

[sydboy007]

I think the goal you have is the important thing to understand.

Then you can start to look at the best way to achieve it, and the varying levels of risk you will need to take. Generally the longer the time frame you have, the lower the level of risk you would need to take.

The issue is numerous studies show a lot of people buy high and sell low. If you are likely to do that, then a lower risk investment may be a better long term way to build wealth. The below graph is admittedly for the USA but I doubt there'd be much difference in Australia.

You also have a need to think about sequencing risk - Ken Henry did a good talk about this back in 2012 at the the 11th Australian Securitisation Forum Conference (I've attached it for anyone interested in the topic). This becomes a greater issue the shorter your investment horizon is.

The GFC also showed that it was good to have a truly balanced portfolio (as opposed to the misnamed balanced super funds).

If you're in, or close to, retirement then inflation linked bonds may be a far safer way to generate the required income to live off for an extended period of time, while someone with 30 years or more to invest can afford to take on more risk in shares.

I think the sensible way forward to is to try and take the least risky path to achieve your goals.

 

[Julia]

Nah, man is pretty much doomed in the long term

What a pessimistic outlook. Every day we have examples of ordinary people doing good things. Concerned individuals who look out for others. Scientists who make life saving discoveries. I believe most people are fundamentally well motivated. Beliefs such as you have expressed above, if held by enough of the population, have the capacity to be self-fulfilling. If you constantly, e.g. tell indigenous people that they will never make anything of themselves, that their destiny is to fail, then that is what will happen.

In contrast, if we instil in ourselves and others the belief that we are all capable of achieving more than we thought possible, that we have resources we've not yet recognised, then that also has the same capacity to be self-fulfilling.

Suicide is tragic,

Not necessarily. Sometimes it's the only answer, in the absence of good end of life legislation, and is a completely rational choice, allowing the individual an escape from pain that they find intolerable, whether physical or psychological.

especially when "caused" by a mistaken belief that losing ones material wealth makes you a failure! .... The failure is actually in the belief that material wealth even mattered in the first place

This is to assume the 'cause' is as simplistic as stated originally. Almost certainly all sorts of other stuff will have been going on in that person's life. The loss of money of itself, in an otherwise well adjusted individual, imo would be unlikely to cause suicide.

Peer pressure is the cause of many suicides ... rather than have the gal to judge some poor soul for feeling the ultimate pressure to terminate their existence, we should perhaps feel guilt that our own misguided sense of self worth may have actually contributed to their decision!! (and I include myself in that summation)

If attributing blame to yourself serves some purpose for you, then I guess you know best about that.
I don't believe that any individual's sense of self worth is determined by anyone else, and I absolutely don't believe the ordinary citizen has a personal responsibility for the end of life decisions of any other person.
Unless, I suppose, they are a pivotal influence in that person's life. Even then, suicide is absolutely an individual and totally personal choice.