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On this episode of The Wealthy Wellthy Podcast, I talked with David Keller of Sierra Alpha Research, a firm specializing in behavioral finance. David comes from a finance background where he studied the statistics behind people’s purchasing and money decisions, and he has found that his sweet spot is helping his clients unpack their behavioral baggage to see how psychology affects their behaviors.
One of his main pieces of advice is to write down your investment plan and determine the rules that will govern your investment decisions. By sticking to the specific benchmarks and timeframes you have set out for yourself, you remove any element of endowment, confirmation, or narrative biases from your process, making your investment decisions more level-headed and less impulsive. David advises new investors to evaluate how much time they have to commit to working on their investments and not put expectations on themselves that are more than they are capable of. A good rule of thumb is to buy good companies at a good time, and you can find out about these opportunities by being informed about the market and self-aware.
As a pilot in training, David has found a lot of parallels between flying and investing. Some of the lessons that are the same for both endeavors are the importance of having and following a checklist and having a back-up or emergency plan when something does not go as planned. Additionally, it is important for people to have a mentor who helps them learn how to invest, just as it is important to have a flying instructor. David busts the myth that investing equals action. Sometimes, he says, the best investing decision is to take no action.
You can also click on the timestamps below to jump to those specific points in the conversation.
What We Covered
- [1:08] – David’s introduction and work history.
- [4:24] – How psychology affects behaviors.
- [6:38] – How to guide people through financial turns.
- [11:57] – David’s 3 most common biases.
- [18:47] – Advice to new investors.
- [21:24] – How to choose individual stocks.
- [23:35] – David’s recommended investing process.
- [31:24] – How the disciplines of flying and investing overlap.
- [40:29] – Advice for the current market.
- [42:48] – David’s mythbusting.
[Tweet “Fear and greed tend to drive your emotional decisions.”]
[Tweet “Don’t confuse brains with a bull market.”]
[Tweet “Until you admit that you have these challenges to your decisions, it’s really hard to make improvements to your process.”]
[Tweet “It’s all about the routine you set up.”]
[Tweet “A good investor uses all the tools available to them.”]
[Tweet “We have way too much information as investors.”]
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