How did Warren Buffett learn to invest? What criteria does he use to choose his investments? How does he manage his portfolio?<\/p>\n\n\n\n
The Warren Buffett Way<\/em> by Robert G. Hagstrom answers these questions and more. Hagstrom believes that, rather than hiring someone else to manage your investments for you, all you need to do is follow Buffett’s way of investing.<\/p>\n\n\n\n Continue reading for an overview of this practical how-to book.<\/p>\n\n\n\n\n\n\n\n To the uninitiated, investing can seem daunting and inaccessible, leading many to either hire professionals to manage their investments or forswear investing altogether. But, according to investment professional Robert G. Hagstrom, this mindset can cause you to leave millions on the table. Hagstrom argues that novice investors should emulate the greatest investor in history\u2014Warren Buffett\u2014so that they too can earn above-market returns. <\/strong><\/p>\n\n\n\n The 2013 book The Warren Buffett Way<\/em><\/a> by Robert G. Hagstrom outlines and explains Buffett\u2019s approach to stock market investing. Hagstrom argues that, rather than simply deferring to financial analysts, investors should follow suit with Buffett and assess companies along four dimensions\u2014their financial prospects, their market value, their business model, and their management\u2014to identify promising companies to invest in. This approach, he suggests, allows investors to find exceptional investment opportunities<\/a>, leaving them poised to earn exceptional returns.<\/p>\n\n\n\n As the current Chief Investment Officer of EquityCompass<\/a>, an investment firm that manages over $4 billion in assets, Hagstrom brings years of investing experience into his arguments throughout The Warren Buffett Way<\/em>. Moreover, having written eight investing books geared toward a general audience, Hagstrom makes accessible even the most complicated aspects of Buffett\u2019s approach to investing.<\/p>\n\n\n\n We\u2019ll first discuss how Buffett quantitatively analyzes companies, explaining Buffett\u2019s specific metrics for evaluating companies\u2019 market value and finances. Next, we\u2019ll examine Buffett\u2019s process for qualitatively assessing companies, outlining the dimensions along which Buffett evaluates companies\u2019 management and business models. To conclude, we\u2019ll examine how Buffett recommends managing your portfolio<\/a>, including how to allocate your portfolio and avoid psychological pitfalls.<\/p>\n\n\n\n According to Hagstrom, Buffett recognizes the importance of rigorous quantitative analysis of the companies he considers investing in. In this section, we\u2019ll first outline how Buffett learned to do so from investing legend Benjamin Graham, and then discuss the metrics that Buffett uses to assess a company\u2019s market value and its financial prospects.<\/p>\n\n\n\n As Hagstrom relates, Buffett was persuaded by the key arguments of Graham\u2019s investing classic, The Intelligent Investor<\/em><\/a>, when studying under Graham at Columbia Business School. In particular, Hagstrom argues that Graham showed Buffett the merits of value investing<\/em>, which involves purchasing companies\u2019 stock for less than its true value. <\/strong>Because Graham developed value investing in the wake of the stock market crash of 1929, its key tenets are diametrically opposed to the reckless speculation that drove the stock market crash\u2014a crash that occurred because investors assumed the stock market could only rise<\/a>, leading to widespread speculative investing.<\/p>\n\n\n\n To understand this approach to investing, we first need to understand the distinction between a company\u2019s share price <\/em>and its intrinsic value. Share price, quite simply, refers to the actual <\/em>price of one share of a company\u2019s stock.<\/p>\n\n\n\n Hagstrom notes, however, that intrinsic value is harder to define. Roughly put, the intrinsic value of a company\u2019s stock is the fair value <\/em>of that stock, assuming all relevant information was known.<\/p>\n\n\n\n For his part, Graham points out that if you buy a stock at a discount to its intrinsic value, you\u2019ve gotten a good deal on the stock. Moreover, he argues that because a company\u2019s share price tracks its intrinsic value over the long term, value investing makes it likely that you\u2019ll profit on your investment as the discounted share price increases to match its intrinsic value<\/strong>.<\/p>\n\n\n\n While Graham taught Buffett the general principles of value investing, Buffett developed his own approach to calculating intrinsic value to find companies that are undervalued<\/strong>. In this section, we\u2019ll examine how Buffett determines a stock\u2019s intrinsic value by establishing a company<\/em>\u2019s intrinsic value and then translating this value into a margin of safety <\/em>when he invests.<\/p>\n\n\n\n As mentioned previously, a stock\u2019s intrinsic value is roughly its fair value. According to Hagstrom, however, Buffett refines this definition by starting with the company\u2019s intrinsic value, which is its expected net income over its lifetime, deducting an appropriate discount rate<\/strong>.<\/p>\n\n\n\n Though Hagstrom doesn\u2019t specify how Buffett calculates a company\u2019s expected net income over its lifetime, he clarifies that Buffett seeks companies that historically have had consistent earnings growth because it\u2019s easier to estimate future earnings for such companies. Next, after estimating a company\u2019s future earnings, he discounts that figure by the long-term government bond rate.<\/p>\n\n\n\n As Hagstrom relates, Buffett determines a company\u2019s intrinsic value to create a margin of safety when investing<\/strong>, as he seeks companies whose stock is significantly undervalued relative to their intrinsic value. Specifically, he seeks companies whose intrinsic value per share<\/em>\u2014that is, the company\u2019s intrinsic value divided by its number of outstanding shares\u2014is much higher than their share price on the stock market. <\/p>\n\n\n\n Buffett\u2019s reasoning for seeking a safety margin is twofold. First, because companies\u2019 stock prices over the long term will correspond with their intrinsic value, companies whose stock price is currently undervalued are likely to see their stock rise in the long term. Second, when his investments have a margin of safety, they\u2019re less likely to see their stock prices drop even if their intrinsic value takes a hit since their intrinsic value per share is higher than their share price to begin with.<\/p>\n\n\n\n Hagstrom notes that, although Graham\u2019s influence is most evident in Buffett\u2019s approach to value investing, it also shaped Buffett\u2019s preference for quantitatively analyzing companies\u2019 finances\u2014typically over a five-year time frame since financial data are volatile on a yearly basis. In particular, Hagstrom explains that Buffett seeks companies that have a high return on equity, owner earnings<\/a>, profit margins, and ratio of retained earnings to share value<\/strong>, metrics that indicate good financial health. <\/p>\n\n\n\n Hagstrom first explains that Buffett prefers looking at companies\u2019 return on equity (ROE) to assess how efficiently companies generate profits, <\/strong>though he tweaks several aspects of the standard definition of return on equity to isolate financial factors alone.<\/p>\n\n\n\n Generally, ROE equals a company\u2019s <\/em>operating earnings (its revenue minus operating expenses) divided by its shareholder equity (its assets, such as inventory, <\/em>minus its liabilities, such as debts).<\/p>\n\n\n\n However, when calculating ROE, Buffett excludes capital gains and losses, since he wants to look solely at the business\u2019s performance rather than how well the company has invested its money<\/strong>. Moreover, Hagstrom notes that Buffett includes the original cost <\/em>of securities that a company owns when examining its net worth, rather than their current market value, so that net worth isn\u2019t affected by external factors such as the stock market\u2019s performance. After all, if a company\u2019s stock holdings rise dramatically one year, increasing its net worth, this could dwarf impressive operating earnings when looking at return on equity.<\/p>\n\n\n\n Next, Hagstrom points out that Buffett assesses companies\u2019 future earnings prospects using <\/strong>owner earnings<\/em><\/strong>, a metric he developed<\/strong> as an alternative to the more common cash flow<\/em>, which tends to overvalue certain companies.<\/p>\n\n\n\n Cash flow, Hagstrom notes, is roughly the amount of cash going into (or out of) a company in a given year. Traditionally, it\u2019s defined as a company\u2019s net income plus its depreciation (how much of its assets\u2019 values have been lost), depletion (how much a company spends extracting natural resources), and amortization (the cost of intangible assets, like patents, spread out across their lifespan).<\/p>\n\n\n\n However, according to Hagstrom, Buffett realized that cash flow fails to include capital expenditures\u2014money used to purchase or repair physical assets, such as heavy machinery in a factory. Because many companies have capital expenditures that at least offset their depreciation, they have cash flows that are misleadingly inflated relative to the actual money going in and out of the company. For this reason, Buffett developed owner earnings, which is simply cash flow minus <\/em>capital expenditures; this metric, he suggests, is less likely to become overinflated.<\/p>\n\n\n\n Though Buffett modifies the definition of return on equity, and outright invents the notion of owner earnings, his approach to profit margins is much more mainstream. According to Hagstrom, Buffett prefers investing in companies with high profit margins<\/strong> because high profit margins indicate a willingness to cut unnecessary expenses.<\/p>\n\n\n\n Profit margins are a company\u2019s profit divided by its revenue. Since profit equals revenue minus expenses, Buffett reasons that companies with high profit margins are likely those that cut costs because one natural way to increase profits is to cut extra spending, making these companies ideal investment targets\u2014after all, profitability is closely correlated to shareholder value.<\/p>\n\n\n\n According to Hagstrom, Buffett\u2019s final method for judging companies is whether they satisfy the \u201cone-dollar test.\u201d These are companies whose market value increases by at least one dollar for every dollar of earnings they retain<\/strong>. <\/p>\n\n\n\n The one-dollar test, Hagstrom notes, shows how effectively companies use their retained earnings\u2014that is, their net income after paying dividends to shareholders. He suggests that companies that savvily re-invest their retained earnings will see their market value increase proportionately. So, companies whose market value increases by at least one dollar for every dollar of retained earnings are likely those that know how best to reinvest their earnings, making them an attractive investment target.<\/p>\n\n\n\n While Buffett embraced Graham\u2019s numbers-driven approach to evaluating companies, he was also sensitive to the qualitative factors that underlie promising companies. In this section, we\u2019ll first examine how Buffett learned the importance of certain qualitative factors from Philip Fisher before moving on to discuss the metrics that Buffett uses to evaluate companies\u2019 business models and management teams in particular.<\/p>\n\n\n\n While Graham placed little emphasis on a company\u2019s qualitative aspects, Philip Fisher held that the more subjective aspects of a company could provide valuable investing guidance. According to Hagstrom, Buffett embraced Fisher\u2019s views on the importance of assessing a company\u2019s potential<\/em> and management<\/em> <\/strong>when deciding whether to invest.<\/p>\n\n\n\n Hagstrom points out that Buffett was persuaded to embrace Fisher\u2019s views by Charlie Munger, the current vice chairman of Buffett\u2019s company, Berkshire Hathaway, and a longstanding friend. However, because we\u2019re concerned with Buffett\u2019s intellectual <\/em>influences rather than personal influences, we\u2019ll be focusing on Fisher\u2019s views in particular.<\/p>\n\n\n\n Hagstrom suggests that Fisher defines a company\u2019s potential as its ability to significantly increase its intrinsic value over the long term. Even if such companies aren\u2019t currently undervalued\u2014as Graham would desire in an investment\u2014Fisher reasons that their share prices are likely to drastically increase over the long term because share price roughly tracks intrinsic value. This prospect makes them attractive investments.<\/p>\n\n\n\n According to Hagstrom, Fisher used two proxies to determine potential: increasing sales and increasing profits. On the one hand, Fisher thought that growth in sales indicated a strong research and development team, as a company\u2019s sales won\u2019t easily increase if it doesn\u2019t continue refining its product. But, Fisher also recognized that increasing sales means nothing without increasing profit since profit most closely correlates with shareholder value. So, he also sought companies that relentlessly cut costs, as cutting costs translates directly to greater profit margins.<\/p>\n\n\n\n Along with potential, Hagstrom notes that Fisher valued honest management since companies with solid business models can nonetheless flounder under shoddy management. After all, self-centered executives are liable to act out of self-interest rather than the interests of the company. Similarly, management teams that mistreat their employees can foster resentment which, ultimately, can make the company less successful.<\/p>\n\n\n\n Returning to Buffett\u2019s approach to investing, Hagstrom contends that Buffett assesses a company\u2019s business model to identify companies with the potential that Fisher seeks. In particular, Hagstrom relates that Buffett prefers to invest in companies that are <\/strong>simple<\/em><\/strong>, <\/strong>predictable<\/em><\/strong>, and have a <\/strong>long-term competitive advantage<\/a><\/em><\/strong> because he can be confident those companies will succeed in the future.<\/p>\n\n\n\n First, Hagstrom explains Buffett\u2019s notion that you should only invest in companies with easily understandable business models. <\/strong>He argues that by investing in simpler companies, you\u2019re more capable of making savvy investment decisions because you\u2019re better poised to understand developments in the company. After all, if you invest in a company far outside your area of expertise, it\u2019ll be difficult to assess any news that\u2019s relevant to the company\u2019s underlying business.<\/p>\n\n\n\n Additionally, Hagstrom says, you should prefer investing in companies that are predictable <\/strong>and have consistently produced the same product. As Hagstrom relates, Buffett\u2019s reasoning for preferring predictable companies is twofold. First, Buffett thinks that companies that pivot frequently and often change their primary product are more prone to blunders because there\u2019s a learning curve whenever you shift products. And second, Buffett holds that companies that have delivered success in the past with one main product are likely to do so in the future since past success is a good indicator of future success.<\/p>\n\n\n\n In a similar vein, Hagstrom notes that Buffett seeks companies with a long-term competitive advantage <\/strong>as potential investing targets. In short, these competitive advantages are sustainable edges that companies use to remain on top of the competition. Such companies, Buffett argues, are likely to continue delivering impressive returns to shareholders, making them an attractive investment.<\/p>\n\n\n\n By contrast, Hagstrom points out that Buffett avoids investing in companies that primarily sell commodities<\/strong>, which are products that are largely indistinguishable from one another\u2014like gas, gold, and water. Buffett argues that because these companies struggle to develop any advantage over competitors, they\u2019re less likely to deliver the exceptional returns he\u2019s looking for.<\/p>\n\n\n\n Though Buffett recognizes the value of companies with promising business models, he also learned from Fisher that such companies can falter under poor management<\/a>. Consequently, Hagstrom argues that Buffett assesses management in terms of their capital allocation<\/a>, transparency, and resistance to trends <\/strong>when deciding whether to invest.<\/p>\n\n\n\n To begin, Hagstrom explains Buffett\u2019s view that because investors seek companies that will deliver a high return on investment, management should allocate capital in a way that maximizes shareholder value<\/strong>. Just like capital allocation can show that companies value their shareholders, transparency is also indicative of shareholder-oriented companies. According to Hagstrom, Buffett holds that you should invest in companies that are transparent about their finances<\/strong> rather than those who obscure their failures through convoluted financial reports.<\/p>\n\n\n\n In particular, Hagstrom suggests that deceptive managers are defending their own interests rather than shareholders\u2019, as they prevent shareholders from making well-informed investment decisions. Consequently, you can\u2019t trust managers of those companies to act in your best interests, making them an unappealing investment.<\/p>\n\n\n\n According to Hagstrom, Buffett\u2019s final criterion for evaluating management is its resistance to popular industry trends<\/a>. Hagstrom writes that Buffett prefers companies that don\u2019t readily submit to popular business trends<\/a><\/strong> since these trends are often irrational and harm companies\u2019 bottom lines.<\/p>\n\n\n\n As Buffett sees it, management teams often make suboptimal decisions simply because other management teams are doing the same. So, Buffett holds that companies whose management teams don\u2019t <\/em>blindly adopt industry-wide trends are a better investment because they\u2019re less likely to imitate others\u2019 harmful decisions.<\/p>\n\n\n\n Having seen how Buffett chooses which individual companies to invest in, we\u2019ll now discuss how he manages his broader investing portfolio. First, we\u2019ll examine the key tenets of focus investing<\/a><\/em>, Buffett\u2019s approach that emphasizes focusing on a select group of stocks. Then, we\u2019ll discuss the psychological pitfalls associated with focus investing and how to avoid them.<\/p>\n\n\n\n According to Hagstrom, Buffett departs significantly from the mainstream when it comes to portfolio management. He writes that, while most investors diversify their portfolios broadly to minimize volatility, Buffett focuses on a select handful of stocks to maximize his chances of above-market returns<\/strong>.<\/p>\n\n\n\n To see the merits of focus investing, it\u2019ll help to first discuss the main alternative: diversification. Hagstrom notes that investors traditionally prefer diversified portfolios because they supposedly minimize risk\u2014after all, if you have 1,000 stocks represented in your portfolio and one lone stock takes a nosedive, it\u2019s unlikely to cause a catastrophic loss. By contrast, if you only have five stocks in your portfolio, one plummeting stock could cause an outsized loss.<\/p>\n\n\n\n However, Hagstrom points out that Buffett is opposed to diversification for one simple reason\u2014it can only lead to mediocre results relative to the market\u2019s average returns. After all, the more diversified your portfolio is, the more closely its returns will mirror those of the stock market. <\/p>\n\n\n\n Not content with mediocrity, Buffett instead prefers a portfolio consisting of around 10 stocks that he deems exceptional. To show that this approach is most likely to generate above-market returns, Hagstrom cites a statistical simulation showing how hypothetical portfolios of different sizes performed over time. This simulation included 3,000 portfolios of only 15 stocks\u2014the focus group\u20143,000 portfolios of 50 stocks, 3,000 portfolios of 100 stocks, and 3,000 portfolios of 250 stocks. Hagstrom notes that, of the focus portfolios, over 25% beat the market over a sample 10-year period; by contrast, only 2% of the portfolios with 250 stocks beat the market over that same time span.<\/p>\n\n\n\n Admittedly, Hagstrom concedes that because smaller portfolios are more volatile<\/em>\u2014meaning they have greater swings in value\u2014they\u2019re also much more likely to deliver below-average <\/em>returns. However, he suggests that investors can avoid this possibility through Buffett\u2019s savvy stock selection, which he deems far less likely to yield subpar returns.<\/p>\n\n\n\n It bears mentioning that Buffett\u2019s focus investing is diametrically opposed to the orthodox investing approach in academia\u2013modern portfolio theory<\/a><\/em>. In particular, Buffett rejects portfolio theory\u2019s understanding of market efficiency and risk.<\/strong><\/p>\n\n\n\n As Hagstrom relates, the cornerstone of the modern portfolio is the efficient market hypothesis<\/a> (EMH)\u2013the thesis that stock market prices perfectly reflect all available information about a given company, meaning all stocks are fairly priced. Consequently, proponents of EMH reason that investing ultimately boils down to luck since no amount of analysis will reveal insights that aren\u2019t already baked into a company\u2019s stock price.<\/p>\n\n\n\n Buffett rejects EMH, arguing that many investors\u2014himself included\u2014have used focus investing to generate above-market returns, and these returns aren\u2019t just the product of luck. These investors, including Charlie Munger, Bill Ruane, and Lou Simpson, all used similar approaches to investing, centered around Graham\u2019s strategy of finding undervalued stocks. And, rather than claiming that the success of this shared approach is a coincidence, Buffett finds it much more believable that EMH is simply mistaken.<\/p>\n\n\n\n Because modern portfolio theory holds that investing boils down to luck, it defines risk as volatility, since the more volatile your portfolio is, the more likely that you\u2019ll lose money. Buffett, however, has a different conception of risk when investing: According to Hagstrom, he defines it as the possibility that you\u2019ll be left with less purchasing power than you began with.<\/p>\n\n\n\n Hagstrom explains that, for this reason, Buffett emphasizes the importance of patience to mitigate risk. After all, if you\u2019ve selected an exceptional stock to invest in, it\u2019s highly likely that its stock price will rise given enough time. By contrast, even if you invest in an exceptional company, your risk will be high if you only hold it for one week since the stock market experiences short-term ebbs and flows.<\/p>\n\n\n\n Because focus investing leads to greater volatility, it can make you more prone to psychological pitfalls. Hagstrom argues that, to maximize success,<\/strong> focus investors must avoid excessive confidence, overreaction bias, and myopic loss aversion<\/strong>. <\/p>\n\n\n\n First, Hagstrom argues that investors need to avoid having excessive confidence, <\/strong>which leads directly to shoddy investment decisions. This overconfidence bias<\/a>, he notes, is a general problem. When it comes to investing in particular, overconfident investors are liable to invest too heavily in stocks they deem exceptional, leaving them susceptible to large losses if these stocks dip.<\/p>\n\n\n\n Next, Hagstrom argues that investors must overcome overreaction bias<\/strong> because it leads them to make imprudent, snap decisions<\/a> on the basis of recent events alone. Put simply, overreaction bias refers to our tendency to assign too much weight to recently discovered information in our decision-making<\/a> process.<\/p>\n\n\n\n Finally, Hagstrom writes that myopic loss aversion is the greatest psychological obstacle to investors\u2019 success. <\/strong>As he relates, myopic loss aversion is the combination of loss aversion\u2014the fact that humans are significantly more sensitive to losses than similar-sized gains\u2014with investors\u2019 tendency to chronically check their portfolios. In other words, it refers to an aversion to short-term losses in particular.<\/p>\n\n\n\n Hagstrom suggests that because the stock market experiences inevitable ebbs and flows, myopic loss aversion can deter us from staying the course and investing for the long term, leading us to sell whenever the market dips. Thus, although this approach might save us from short-term losses, it prevents us from reaping the massive long-term gains that investors like Buffett are after.<\/p>\n","protected":false},"excerpt":{"rendered":" How did Warren Buffett learn to invest? What criteria does he use to choose his investments? How does he manage his portfolio? The Warren Buffett Way by Robert G. Hagstrom answers these questions and more. Hagstrom believes that, rather than hiring someone else to manage your investments for you, all you need to do is follow Buffett’s way of investing. Continue reading for an overview of this practical how-to book.<\/p>\n","protected":false},"author":9,"featured_media":80904,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[40,31,33],"tags":[1073],"class_list":["post-106233","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-books","category-money","category-people","tag-the-warren-buffett-way","","tg-column-two"],"yoast_head":"\nOverview of The Warren Buffett Way<\/em> by Robert G. Hagstrom<\/h2>\n\n\n\n
How Buffett Quantitatively Assesses Companies<\/h3>\n\n\n\n
The Influence of Benjamin Graham<\/h4>\n\n\n\n
How Buffett Assesses a Company\u2019s Market Value<\/h4>\n\n\n\n
Metric #1: Intrinsic Value<\/h5>\n\n\n\n
Metric #2: Safety Margin<\/h5>\n\n\n\n
How Buffett Assesses a Company\u2019s Finances<\/h4>\n\n\n\n
Metric #1: Return on Equity<\/h5>\n\n\n\n
Metric #2: Owner Earnings<\/h5>\n\n\n\n
Metric #3: Profit Margins<\/h5>\n\n\n\n
Metric #4: The One-Dollar Test<\/h5>\n\n\n\n
How Buffett Qualitatively Assesses Companies<\/h3>\n\n\n\n
The Influence of Philip Fisher<\/h4>\n\n\n\n
Assessing a Company\u2019s Potential<\/h5>\n\n\n\n
Assessing a Company\u2019s Management<\/h5>\n\n\n\n
How Buffett Assesses a Company\u2019s Business Model<\/h4>\n\n\n\n
Metric #1: Simplicity<\/h5>\n\n\n\n
Metric #2: Predictability <\/h5>\n\n\n\n
Metric #3: Long-Term Competitive Advantage<\/h5>\n\n\n\n
How Buffett Assesses a Company\u2019s Management<\/h4>\n\n\n\n
Metric #1: Capital Allocation<\/h5>\n\n\n\n
Put simply, capital allocation refers to the distribution of company earnings\u2014in other words, what the company does <\/em>with the money it earns. Broadly speaking, Buffett holds that companies can either reinvest that money within the company, such as by sending additional funding to promising branches, or use it to pay dividends to shareholders. Crucially, while the second option seems like a natural way to maximize shareholder value, Buffett argues that if companies can reinvest that same money within the company <\/em>to deliver long-term returns that are greater than those dividends, they should do so. Conversely, he recommends that companies pay dividends if they can\u2019t earn shareholders greater returns by investing their earnings internally.<\/p>\n\n\n\nMetric #2: Transparency<\/h5>\n\n\n\n
Metric #3: Trend Resistance<\/h5>\n\n\n\n
How to Manage Your Portfolio<\/h3>\n\n\n\n
The Superiority of Focus Investing<\/h4>\n\n\n\n
Focus Investing and Modern Portfolio Theory<\/h5>\n\n\n\n
View #1: The Efficient Market Hypothesis<\/h6>\n\n\n\n
View #2: Defining Risk as Volatility<\/h6>\n\n\n\n
Psychological Pitfalls to Avoid<\/h4>\n\n\n\n
Pitfall #1: Excessive Confidence<\/h5>\n\n\n\n
Pitfall #2: Overreaction Bias<\/h5>\n\n\n\n
Pitfall #3: Myopic Loss Aversion<\/h5>\n\n\n\n