BehaviorAlpha

A maverick is an independent individual who does not go along with a group or party (courtesy of Merriam-Webster’s definition). In general, going against "the herd" usually means stepping out of the comfort zone, thereby putting yourself on the edge. Failing alone while everyone else achieves their results is far more painful than failing when everyone is failing with you. Similarly, in the financial markets, losing money during a bull run is much worse than losing money during a recession or a crisis. The idea of maverick risk is a compelling one. From a human behavioral standpoint, we are conditioned to think of being outside of the herd as risky. There is plenty of evolutionary logic behind this idea, considering that humans spent much of their existence as both predator and prey. There is safety in numbers. So as much as we know the value of thinking outside the box or being contrarian, and as much as we value and revere those in society who are capable of going it ...

  The Disposition Effect   Have you ever found yourself in the middle of a stock market nightmare, gripping onto a losing stock like a desperate ex-boyfriend who just can't let go? You know it's not good for you. You know it's not going to work out. But you can't help but hold on, convinced that one day, that stock will bounce back and make everything better. And then, in the end, the stock just keeps plummeting, leaving you feeling like an idiot.   On the flip side, have you ever sold a stock that was doing great, just because you were too anxious to lock in your gains? You sell it, and then watch as the stock keeps climbing, and you're left kicking yourself for not holding on just a little longer.   If you've ever found yourself in either of these situations, you're in good company. This phenomenon takes the name of disposition effect , and it's a common behavioral bias that affects investors of all levels of experienc e .    The dispo...