Mauboussin: Investing's Biggest Error Is Confusing Fundamentals with Expectations
Michael Mauboussin · Michael Mauboussin – Who's on the Other Side (Capital Allocators, EP.99) · May 13, 2019 · at 14:33
Michael Mauboussin explains the handicapper mental model for investing and how to establish a behavioral edge over consensus market psychology.
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“The biggest mistake in the investment business is a failure to distinguish between between fundamentals and expectations, which is to say, when fundamentals are good, we all want to buy. Welcome to the human race, right? And when fundamentals are bad, you want to sell. And really, the mindset you should have is that of a handicapper, a horse race handicapper. The fundamentals are how fast the horse will run. The odds on the tote board are what is priced in, and what you're really looking for is not winners of races, but rather mispricing in the odds.”
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