Stanley Teitelbaum, Ph.D., joined me on âTurn the Pageâ to share his guidance on âOvercoming Self-Defeating Patterns in Stock Market Investing.â Dr. Teitelbaum has been a practicing clinical psychologist and psychoanalyst for over 35 years. As a member of the Financial Therapy Association, he collaborates with wealth managers, financial advisors, and their clients to help them optimize financial outcomes. He suggests that you can build a personal investment portfolio that outperforms your brokerage accounts IF you overcome your self-defeating investment patterns and follow basic principles based on a better understanding of stock market performance.
Listen to my conversation with Dr. TeitelbaumÂ to learn about distinguishing reality from illusion in stock market investing, and how to overcome common self-defeating patterns and other wealth destroying roadblocks. Dr. Teitelbaum draws on over three decades of his own experience with both brokerage accounts and personal investing in sharing his advice.
He spoke with me after the show to expand on his tips:
1) âAvoidance of shame is one of the biggest emotional obstacles to successful stock market investing, which prompts people to hold on to losing investments for too long. Â Sometimes we make a stock pick that we have reasons to believe will be a sure winner, and surprisingly it turns sour. Â Recognize that no investor bats .1000, but by maintaining a strategy of taking small losses you can be a winner.â
2) âIt is helpful to be aware of the defense mechanisms of denial, avoidance, rationalization, and self-deception that investors utilize to perpetuate self- defeating patterns. Â Develop a checklist of potential pitfalls when you see yourself at risk for repeating poor investment decisions like buying high and selling low.â
3) âBe aware of the tendency to overestimate your level of risk tolerance, especially during a bull market when high returns buoy our exuberance and inflate our overconfidence.â
4) âFindings from neuroscience reveal that the serotonin rush that we experience with a successful investment can be a big turn-on that leads us to drift away from our strategy of being disciplined (observing the performance of a stock over time, and basing your actions on this longer-term evaluation). Always be mindful of the role of euphoria in a bull market and despair in a bear market as emotional drivers that can influence us, and develop an inner dialogue to contain overreacting in either direction.â
5) âSuccessful investing is also related to following favorable probabilities such as âthe trend is your friendâ and seasonal factors like âThe January Effectâ (which demonstrates that a positive market in January often augurs well for the full year), and âSell in May and go awayâ (which highlights the stock market history that the May-October period often underperforms the November-April period). Use these patterns to enhance your investing track record.â
QUOTES TO INVEST BY AND RESOURCES TO HONE YOUR SKILLS
Dr. Teitelbaum shares quotes from investment experts:
1) âAnyone has a 50-50 chance of beating the overall market in a short period of time, but to do so consistently is extremely unusual.â
âA Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investingâ by Burton Malkiel
2) âLucky fools do not bear the slightest suspicion that they might be lucky foolsâ âFooled by Randomness: The Hidden Role of Chance in Life and in the Marketsâ by Nassim Taleb
3) âWhen the dumb investor realizes how dumb he is and buys a low cost index fund, he becomes smarter than the smartest investor.â Warren Buffett, Business Mogul, Investor, and Philanthropist
4) âActive mutual funds are fat, dumb, and happy, soaking would be retirees with excessive fees.â Jack Bogle, Founder and Retired CEO of The Vanguard Group, Author of the national best selling book âCommon Sense on Mutual Funds: New Imperatives for the Intelligent Investorâ
5) âProfessional investors, including fund managers, fail a basic test of skill: persistent achievement.â Daniel Kahneman, Psychologist, Behavioral Economist, and 2002 recipient of Nobel Memorial Prize in Economic Sciences
Learn more about examining illusions versus reality in your approach to stock market investing by reading Dr. Teitelbaumâs book, âIllusion and Disillusionment.â
If youâre a wealth manager or investor whoâd like to improve your financial results, Dr. Teitelbaum invites you to contact him at (212) 689-2266 and Cobaltjag@aol.com. For more information about Dr. Teitelbaum, visit the Financial Therapy Association website, and listen to our conversation.