Investment Strategists Speak Up

Daniel Kahneman is a psychologist who won the Nobel in economic science. In Kahneman’s book, “Thinking, Fast and Slow”, he divides people’s thinking into two systems. System 1 is a fast intuition based system while system 2 is slower and includes the ability to reason. New York Times provides tips from respected investment strategists for when system 1 and system 2 both think that 2012 looks bleak for investments.

Michael Maboussin, chief investment strategist at Legg Mason Capital Management points out that the economy is an area that cannot be predicted with ease. He advises investors not to get caught up and to have a risk tolerance and a time horizon. Managing director of planning services at Morgan Stanley Smith Barney, Robert Seaberg, adds that the game should be more about risk management than investing. He says, “[f]orget the home runs. Guard against the really big losses, and go for singles and doubles. You win more games than you lose.” Overall, investors should not be scared away from the market, but they should just be prepared to have a risk management plan and don’t get too caught up in the day-to-day rise and fall of certain investments.

Paul Sullivan, Debating Financial Strategies For the New Year After a Downbeat 2011, New York Times, Dec. 23, 2011. 

Special thanks to Jim Hillhouse (WealthCounsel) for bringing this article to my attention.