Building An IKEA Portfolio

Cartoon Capers

If you get someone to build an IKEA sideboard – you know, one of those flat-pack conundrums that involves trying to work out what a cartoon character is doing with a hammer, a drill and forty three assorted metal dowels – they immediately place a higher value on it than anyone else would, even if it goes on to develop an alarming 45 degree tilt.  This is the IKEA effect.

It’s associated, sort of, with a more general behavior that’s been known about for years, the endowment effect, in which possession of an item immediately causes us to value it more highly. Just imagine what the impact might be if you build your own portfolio, no matter how wonky it might be.

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Can Software Beat Penny-Flippers?

"Am I doing better than I could do by flipping pennies?" – Paul Meehl

Denial is Futile

The Abnormal Returns website recently highlighted an interesting little spat on the blogosphere, as commentators argue over the benefits of software based investment advice.  It’s a trend with only one outcome, one that probably doesn’t do investors any good, but equally one that’s sadly inevitable.

What’s more interesting, though, is the creaking movements of tectonic plates as various commentators position themselves uneasily on the cusp of a disruptive change.  You can see the status quo bias at work, but like it or not, change is coming: the markets won’t be denied.

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