You aren’t the same when you lose money as you are when you make money; just ask some of the folks who took a beating on bitcoin this week. Nor do y

Why You Shouldn’t Buy Bitcoin When You’re Hungry

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2021-05-29 23:30:05

You aren’t the same when you lose money as you are when you make money; just ask some of the folks who took a beating on bitcoin this week. Nor do you invest the same when you’re calm, rested, well-fed and alert as you do if you’re upset or tired or hungry or bored. You may even make different investing decisions in the evening than in the morning.

An important new book, “Noise: A Flaw in Human Judgment,” by Daniel Kahneman, Olivier Sibony and Cass Sunstein, shows that decisions by people and organizations are far less consistent and more variable than we think. Every investor needs to take account of that; otherwise, your long-term results will always be hostage to short-term whims and circumstances.

How does the book define noise? It’s deviations in judgments that should be identical. Noise exists mainly across people; you and I can look at the same facts and interpret them in divergent ways. It also exists within each of us; a stock you considered risky on Thursday can feel safe on Friday, even if the price didn’t change.