During his recent presentation, Aswath Damodaran explains why the biggest sin in investing is arrogance. Here’s an excerpt from the presentation:
Damodaran: If the greatest sin in investing is arrogance, markets exist to bring us back to earth and teach us humility. The first half of 2023 was a reminder that no matter who you are as an analyst, and how well thought through your investment thesis is, the market has other plans.
As you listen to market gurus spin tales about markets, sometimes based upon historical data and compelling charts, it is worth remembering that forecasting where the entire market is going is, by itself, an act of hubris.
In the spirit of humility, I would suggest that if you were a winner in the first half of this year, recognize that much of that can be attributed to luck, and what the market gives, it can take away.
By the same token, if you were a loser over the course of the last six months, regret should not lead you to try to load up on the winners over that period. That ship has sailed, and who knows?
Your loser portfolio may be well positioned to take advantage of whatever is coming in the next six months.
You can watch the entire discussion here:
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