Counteracting Consequences from Chasing the Big Score Ruined by Nuttiness

Methods to Counteract the Pitfalls of Euphoria

Our brains automatically anticipate that rising stock prices will continue to rise and, if they do, the natural chemical dopamine is released, resulting in a feeling of euphoria. To counter this and other tests to investor willpower, Benjamin Graham suggests the use of more mechanical methods for portfolio rebalancing, which today could take the form of formulaic adjustments based on asset-class exposure, industry exposure or position size.

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