Robert Seawright – Avoid Overconfidence Bias by Remembering That Randomness Is Everywhere

Robert “Bob“ Seawright is the Chief Investment & Information Officer for Madison Avenue Securities, LLC, an investment advisory firm and broker-dealer headquartered in San Diego, California. Bob’s blog, Above the Market, has received “best of” recognition from a wide variety of sources, including The Wall Street Journal and the CFA Institute, and is the #7 rated advisor blog in the country based upon readership, linkage, and influence. And don’t’ miss The Better Letter Newsletter that he writes about markets and life and comes out every Friday morning.   “Good advice wrongly applied isn’t any better than bad advice.” Robert Seawright   Worst investment ever Beginner’s luck Bob’s worst investment ever, like for most investors, was when he was starting as an investor. At the time, Bob was working on the fixed income trading floor for a big Wall Street investment house trading bonds all day every day. So what he knew and understood was bonds. Bod had learned from the bigwigs of investing, such as Peter Lynch, to invest in what you know. So Bob allocated his investment money heavily toward bonds. Thanks to beginner’s luck, he did just fine with his bond investments. Missing out on higher returns While Bob never lost any money for investing in bonds, he played too safe and missed out on other investments that he should have made early in his life. Such investments, with compounding they could have had a lot more returns. Luck and randomness have always been his saving grace In the course of his life, Bob has made a few more bad investments that somehow have turned out well for him, thanks to luck. For instance, he bought a house at the wrong time, but as random as this decision was, it turned out great for him. Bob also went against financial planning advice and paid for his kids’ education. Bob had not been able to go to college, where he wanted because his parents didn’t have the money. So it was a very important value for Bob to provide the best education possible for his kids. This is even though he knew that would mean working longer and having less in retirement. Bob knew from an investment standpoint, it was foolish, but he did it anyway. Lessons learned What...