We have been discussing Behavioral Investing on our blog for a while now and whats fascinating is that study-after-study shows that humans are the worst decision makers out there. We have the mind of a Lemming, we over trade, and we fall for stories.
Entrepreneurs are often advised to write their business plan on pen and paper. They may not have a profitable plan, but the very act of writing something down clarifies thoughts. To act clearly and rationally, it seems, we need to write a program. The very act of programming an investment strategy leads to a deeper thinking and clarifies risk, uncertainty and reward.
In fact, 2 out of the top 5 performing Investment Themes have been quantitative portfolios.
Investors should focus on writing a better model and developing the courage to allow it to do its job. If it fails on pre-defined statistical measures, debug the model and try again.