Investing mistakes
Two great investors have been in the news of late. One has a legendary ability to pick equity winners while the other had, till recently, an astonishing track record in the bond markets
Two great investors have been in the news of late. One has a legendary ability to pick equity winners while the other had, till recently, an astonishing track record in the bond markets.
Warren Buffett bought a large stake in British retailer Tesco way back in 2006. Its share price is in free fall after an accounting scandal. Buffett last week called his investment a huge mistake. Bill Gross walked out of the bond fund he helped establish in 1971. His stellar performance came under scrutiny after he took wrong calls on US monetary policy in the past few years. His hubristic management style also came under fire.
The upshot: even the best investors make mistakes. The human brain is hardwired to celebrate successes rather than learn from failures. Behavioural economists describe this cognitive flaw as survivorship bias. One reason why Buffett is so good is that he openly accepts his failures. It is an ability that one does not see often in the Indian financial markets or company boardrooms.
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