Stockbrokers Should Use The “Middle Path”
Tuesday, February 24th, 2009
WHAT GOES UP MUST COME DOWN from ABOVE on Vimeo.
The effects of the current recession end up creating suffering for many people, it could be helped if the individuals behind many of the decisions that contributed to the recession had more balanced minds and more robust and logical understanding of the share values they are directly effecting.
In the last episode of BBC’s Evan Davis’s series The City Uncovered Evan talks to ex stockbroker turned psychologist about how stockbrokers behave like herds of wilderbeast, spooked by the smallest thing and they all go mad. Behavioral finance governs the way many traders make key decisions, eventually influencing share value patterns. Below is part of recent blog post I came across by a banker…
Behavioural finance is a well known subject area and has been studied by some of the greatest economists in modern times. And yet, we (the investor) continue to make the same mistakes! We trade on our emotions, we buy because we are greedy and we sell because we are fearful. Studies were done on professional traders during the tech bubble/bust in the early 2000’s. It was noticed that during periods of profit, traders displayed higher levels of testosterone, which lead to increased risk-taking and more bravado. During the bust period, traders displayed higher levels of Cortisone, the body’s natural way of dealing with stress, and a way of suppressing bad memories. Greed and Fear are natural emotions and removing them from your trading is extremely difficult.
So many stockbrokers don’t make decisions from their own research and logical conclusions but, like Dave Hinnenkamp, CEO at KDV Wealth Management said, “It’s fear-based selling”.
Instead of basing decisions on varying emotional states they should take - the middle way - which is about consistently navigating between extremes…
“Middle Path” may be misunderstood as equivocal. In fact Buddhism is not as such. “Middle” means neutral, upright, and centered. It means to investigate and penetrate the core of life and all things with an upright, unbiased attitude. In order to solve a problem, we should position ourselves on neutral, upright and unbiased ground. We investigate the problem from various angles, analyze the findings, understand the truth thoroughly, and find a reasonable conclusion.
The Middle Path in Buddhism does not mean having a biased view or superficial understanding only. The “Middle Path” represents a distinct theory and way of Buddhist practice that is not common to other religions. Buddhism is a religion with high moral values. It lays great emphasis on human thought and action in dealing with the natural environment, society or individual problems. It is concerned with the relationship between thoughts and behavior, and the relationship between behavior and its consequences

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