In a September interview on the Off the Chain podcast, legendary investor James O’Shaughnessy shared insights on human nature, psychology, and how they manifest in investing decisions.

Here are some highlights:

  • On cryptocurrency, O’Shaughnessy explained that he doesn’t know enough to be a “bull or bear.” O’Shaughnessy believes that crytocurrency, which is based on a deflationary monetary model, has some appealing aspects and might represent a store of value if it saw less volatility. But volatility causes uncertainty.
  • Fear, greed and hope, O’Shaughnessy argued, have wiped out more wealth than anything else.
  • Human nature has not changed and won’t any time soon. “If you get a really good understanding of how humans are emotionally designed,” O’Shaughnessy said, “you can have much greater faith in saying, ‘It’s going to happen exactly the same way it happened before.’ “
  • The United States, he argued, has one of the “best functioning market systems” supported by a high-functioning democratic system, which protects it from hyper-inflationary forces.
  • Stocks do best, O’Shaughnessy said, under moderately inflationary circumstances. Deflation, he said, “is a scary thing for an economy” because it results in a loss of consumer confidence. People won’t buy cars, he argued, if they know the price will go down in a few weeks or months. “They’ll just hang onto cash.”
  • His firm, O’Shaughnessy Asset Management, abides by a rule-based investment methodology. “In my thirty-plus year career,” he said, “I have never emotionally given in by over-writing a model, and that’s hard” O’Shaughnessy said.
  • He recommends that people keep journals so they have an account of what they are actually thinking during various market events, so you have a handwritten account “staring you in the face. The mind,” he said, “will play beautiful tricks on you.”
  • O’Shaughnessy said that the best financial advice he every received originated with Warren Buffett, who said, “price is my only diligence.”
  • “Good investing is simple,” O’Shaughnessy concluded, “It’s just not easy.”

For more market trends, visit ETF Trends.

Subscribe to our free daily newsletters!
Please enter your email address to subscribe to ETF Trends' newsletters featuring latest news and educational events.