“The fault, dear investor, is not in our stars — and not in our stocks — but in ourselves…” – Ben Graham
One of the greatest sources of edge is the one and only thing you have any power over – your own behaviour. If you can keep your head, while everyone else is losing theirs, then you can be there to exploit the mistakes of others and scoop up what is being left on the table.
Behavioural biases are the most persistent source of advantage in financial markets. Yet they are the most difficult to exploit. These biases have always been present and always will; human nature doesn’t change after all. We may think that we have evolved into smart people, capable of coldly calculating the odds of a market crash occurring and bailing out before the first signs of trouble. Unfortunately, our brains are still running with the same software that our ancestors had, thousands of years ago.