Your BRAIN Loses YOUR Money. Here's The Fix... — Transcript

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1. 0:00Look at this picture. Is it blue and
2. 0:02black or golden white? Ask your friend
3. 0:04and they will pick the other one. Same
4. 0:06pixels, different brains. Look at this
5. 0:08one. Some of you see an old woman. Some
6. 0:11of you see a young woman. Same ink,
7. 0:13different brain. Your brain just did the
8. 0:15same thing that the dress did, twice in
9. 0:1830 seconds. Your brain decided what
10. 0:20color it is, and you do the exact same
11. 0:22thing in your portfolio. You have no
12. 0:25idea that you are doing it. By the end
13. 0:27of this video, you will know the names
14. 0:28of four biases that are deciding your
15. 0:31trades for you right now without you
16. 0:33even knowing it. Every human has them.
17. 0:36You, me, Warren Buffett. This is wiring
18. 0:39you were born with. Nobody taught you to
19. 0:40see it until today. So, what is one
20. 0:43picture in your head right now that is
21. 0:45deciding your portfolio for you? My name
22. 0:48is Ken Freeman, CFA charter holder,
23. 0:49Rutgers Business School professor, and I
24. 0:51have over 20 years of experience working
25. 0:54on Wall Street. I train the analysts at
26. 0:56JP Morgan, Morgan Stanley, and
27. 0:57BlackRock. Behavioral finance is what I
28. 1:00teach them first. Let me show you what I
29. 1:02mean. Meet Mary. Mary is quiet,
30. 1:05studious, and concerned with social
31. 1:07issues. While a student at Harvard, Mary
32. 1:09was an English literature major and
33. 1:12minored in environmental studies. Which
34. 1:14is more likely? A, Mary is a librarian.
35. 1:18B, Mary is a librarian and was a member
36. 1:20of Harvard's environmental club. C, Mary
37. 1:23is a mechanical engineer. Most viewers
38. 1:25just picked B. If you picked B, you just
39. 1:28watched it happen. B has to be less
40. 1:31likely than A because B is A with one
41. 1:34extra condition. Two conditions can
42. 1:36never be more likely than one. Kahneman
43. 1:39and Tversky proved this in 1983. A good
44. 1:42company is not a good investment. Your
45. 1:45brain just proved it cannot tell them
46. 1:47apart. There are four boxes that you can
47. 1:50live in as an investor. Box one,
48. 1:52conscious competence. You know exactly
49. 1:55what you're doing, or you know what you
50. 1:57know. Box two, conscious incompetence.
51. 2:00You know what you do not know. Box
52. 2:02three, unconscious competence. You do it
53. 2:06right on instinct, or you don't know
54. 2:08what you know. Box four, unconscious
55. 2:11incompetence. You don't know what you
56. 2:14don't know. Box four is where money
57. 2:16dies, so we need to run from that.
58. 2:19Today, the job is moving you from box
59. 2:21four to box two. From there, the rest is
60. 2:24practice. Before we go one by one, let
61. 2:27me nail down what we are actually
62. 2:29fighting. One number has held up for 30
63. 2:31years. The average retail investor earns
64. 2:34roughly 2 and 1/2% per year. A basic
65. 2:3760/40 portfolio earns roughly 8.7% per
66. 2:40year. That gap is six points every
67. 2:43single year. You are statistically the
68. 2:46average investor. The next few minutes
69. 2:48are the four reasons why. Picture this,
70. 2:51you find a $100 bill on the sidewalk.
71. 2:54How good do you feel? Now, picture
72. 2:56losing $100 out of your pocket. How bad
73. 2:59do you feel? The bad feeling is about
74. 3:01twice as strong. Same dollar amount,
75. 3:03twice the punch. This asymmetry runs
76. 3:06your account every single day. Behavior
77. 3:08one, you hold losers way too long.
78. 3:12Behavior two, you sell winners way too
79. 3:15soon. Peter Lynch had an analogy for it,
80. 3:18cutting your flowers and watering your
81. 3:20weeds. Try this right now. Name the last
82. 3:23stock that you sold out loud. Was it a
83. 3:25winner or a loser? I'll wait.
84. 3:28Now, name a stock that you're still
85. 3:30holding underwater. I'll wait again.
86. 3:34You sold the winner. You are babysitting
87. 3:36the loser. That is loss aversion with a
88. 3:39name on it now. Here's the fix that
89. 3:41breaks down both behaviors. Look at
90. 3:44every losing stock in your account.
91. 3:46Pretend that you do not own it right
92. 3:48now. Would you buy it today at this
93. 3:50price? If yes, hold it. The loss is just
94. 3:53the price. If no, sell it today. Waiting
95. 3:56for the comeback is the costliest habit.
96. 3:58The longer you hold the loser, the more
97. 4:01impossible the math gets. Studies of
98. 4:03real brokerage accounts show this. Loss
99. 4:05aversion alone costs retail investors 1
100. 4:08to 2 percentage points every single
101. 4:11year. Compound that over 30 years.
102. 4:13Hundreds of thousands of dollars gone.
103. 4:16Here is what your brain hides from you.
104. 4:18What you paid for the stock is gone. It
105. 4:21is a sunk cost. The market has no memory
106. 4:23of it. The only number that matters is
107. 4:26the price right now. Warren Buffett's
108. 4:28mentor, Ben Graham, had a great
109. 4:30perspective on stock price. In the short
110. 4:33run, the market is a voting machine. In
111. 4:35the long run, the market is a weighing
112. 4:37machine. It weighs or values earnings.
113. 4:41Read the financials. Stop reading the
114. 4:43daily price. Right now, open your stock
115. 4:46app. Scroll to the one position that you
116. 4:48forgot on purpose. Loss aversion has a
117. 4:51name on it now. The next one is another
118. 4:53that most retail investors do. How much
119. 4:55would you sell your car for tomorrow?
120. 4:57Now, picture that same exact car on a
121. 5:00lot. How much would you pay for it?
122. 5:02Almost every owner wants more to sell
123. 5:04than they would pay to buy. That is the
124. 5:07endowment effect. The second that
125. 5:08something is yours, your brain inflates
126. 5:11the value of it. Here's the same wiring
127. 5:13inside your account. You bought a stock
128. 5:15at 100. Your buddy bought the same stock
129. 5:17at 75. Today, it's sitting at 80. Same
130. 5:21ticker, same price, same minute. You are
131. 5:23sick to your stomach. Your friend is
132. 5:26thrilled. The only thing different is
133. 5:28the number burned into your head. That
134. 5:30number lives only in your skull, and it
135. 5:33is running your sell button. Same thing
136. 5:35is happening in your account. The market
137. 5:37sees a ticker. It values cash flow. Your
138. 5:41research goes in the trash. Same fixes
139. 5:43rule one, slightly different question.
140. 5:45Walk through every stock you own. Would
141. 5:48I open this position from scratch today?
142. 5:51Whatever you would not buy back, you are
143. 5:53holding because it's yours. Try this on
144. 5:56the position that you love the most.
145. 5:58Would you buy the stock today? Picture
146. 6:00saying its name out loud. Feel that
147. 6:02little defensive twitch? That twitch is
148. 6:05endowment bias, caught red-handed. The
149. 6:08ticker that you just felt that twitch
150. 6:09on, that is the position you should sell
151. 6:12first. Two biases down. If this is
152. 6:14changing how you think about investing,
153. 6:16hit like and subscribe. It is how I
154. 6:18bring you this Wall Street knowledge for
155. 6:20free every week. And there are two ways
156. 6:23to go deeper. Office Hours gets live
157. 6:25streams before the public, and only that
158. 6:28tier can ask questions live. Private
159. 6:31Office Hours gets the raw model build
160. 6:33for the next stock breakdown. You can
161. 6:35learn more about my membership below.
162. 6:38You have heard buy low, sell high your
163. 6:40whole life. Explain something to me. Why
164. 6:42do you keep doing the exact opposite?
165. 6:45Look at squares A and B on the screen.
166. 6:47Which one is darker? They're the exact
167. 6:50same shade of gray. The frame around
168. 6:52them changed what you saw. Behavioral
169. 6:54finance calls this frame dependence.
170. 6:57Whatever just happened feels permanent.
171. 6:59Last 30 days feels like the next 5
172. 7:02years. That is recency bias. Try this
173. 7:05one. Flip a coin six times. Sequence A:
174. 7:08heads, heads, heads, tails, tails,
175. 7:10tails. Sequence B: heads, tails, heads,
176. 7:14tails, tails, heads. Which is more
177. 7:16likely? Pick one in your head. They have
178. 7:19the exact same odds. Your brain swears
179. 7:21that B looks more random. That is the
180. 7:24same wiring that makes three green days
181. 7:27feel like a hot stock. It is a coin
182. 7:30flip. On September 9th, 2025, Oracle
183. 7:32reported earnings. The next day, Oracle
184. 7:35rose about 36% in one session. Why?
185. 7:39Their cloud backlog jumped to roughly
186. 7:41$455 billion,
187. 7:44up 359%
188. 7:46year over year. Oracle hit an all-time
189. 7:49high of 345.72 that day. Then, recency
190. 7:53did its job on retail. Oracle has traded
191. 7:55back well off that high, bottomed near
192. 7:58174 in April of this year. The cloud
193. 8:01deals are still real. The backlog is
194. 8:03still real. Your brain just bought the
195. 8:06move, not the business valuation. And
196. 8:09there's one chart that proves it, the
197. 8:11cycle of market emotions. Euphoria at
198. 8:14the top, labeled maximum financial risk.
199. 8:18Despondency at the bottom, maximum
200. 8:21opportunity. Your brain wants to buy at
201. 8:23euphoria and sell at despondency. This
202. 8:26is where Warren Buffett's quote, "Buy
203. 8:28when there's blood in the streets" comes
204. 8:30from. Here is the fix. Stop looking at
205. 8:33the last 30 days of price. Look at the
206. 8:35financials over the last 5 years. Ask
207. 8:38where the business goes in the next 5
208. 8:40years. Financials improving while the
209. 8:42price drops? That is your buy signal.
210. 8:45Right now, scroll through your
211. 8:47watchlist. Find the ticker that you
212. 8:48added in the last 30 days. Loss
213. 8:51aversion, endowment, recency bias. They
214. 8:53all share an engine, and rule four is
215. 8:56the engine. Stocks don't have feelings.
216. 8:59When it comes to investing, neither
217. 9:00should you. Count the news refreshes
218. 9:02that you did on stocks today. Each one
219. 9:05is a vote of love. Each one is also a
220. 9:07vote against your account. The stock
221. 9:09channels you follow only cover what they
222. 9:12own. They never once tell you to sell
223. 9:14it. That is confirmation bias with a
224. 9:16camera on. And you keep watching because
225. 9:20it agrees with what you already bought.
226. 9:22Tell me that you knew Nvidia would hit
227. 9:24$200. Did you buy it? At what price?
228. 9:28Hours of news scanning makes you feel
229. 9:30like you have an edge, but tomorrow's
230. 9:32news hasn't happened yet. When you lose
231. 9:34money, it was bad luck. But when the
232. 9:37next guy loses, he made a mistake. All
233. 9:39four stacked into one word,
234. 9:42overconfidence. Pick up a pen and paper.
235. 9:44Check the S&P 500 close today. Give me
236. 9:47two numbers. A ceiling that you're 99%
237. 9:50sure that the S&P stays below in the
238. 9:54next 12 months. A floor that you are 99%
239. 9:57sure it stays above. Write them down.
240. 10:00I'll wait.
241. 10:02You probably wrote 10% below today and
242. 10:0515% above. That is comfortable. To be
243. 10:08genuinely 99% sure, your floor should be
244. 10:12near zero. Your ceiling should sound
245. 10:14insane. The gap should be enormous.
246. 10:17Yours was comfortable. Comfortable means
247. 10:19wrong. We just measured your
248. 10:21overconfidence. Look down at the gap you
249. 10:23wrote. That gap is the size of your
250. 10:26investing world. Narrow. Comfortable.
251. 10:29Almost certainly wrong. If your band
252. 10:31felt reasonable, that is the exact
253. 10:33feeling that empties accounts. One more
254. 10:35curveball to know. Beginners feel
255. 10:37confident. Real experts feel confident.
256. 10:40The danger zone is in the middle, where
257. 10:43confidence outruns experience. But, here
258. 10:46is the fix. Before any buy, write down
259. 10:49what would make you sell. Then, read the
260. 10:51bear case twice out loud. Follow three
261. 10:54accounts that hate the stock. If you
262. 10:56cannot defend against them, you own an
263. 10:58opinion dressed as a position. Picture
264. 11:01it. You're about to click buy on the
265. 11:03next thing that a YouTube video just
266. 11:05sold you. Right now, on your next buy,
267. 11:08pull up the bull case and the bear case
268. 11:10side by side. Watch your eyes. Read both
269. 11:13sides and all four biases lose their
270. 11:16grip. They cannot run if you stop them
271. 11:18in their tracks. Remember the four boxes
272. 11:20from the start of this video? Box four
273. 11:22is where money dies. You walked in at
274. 11:25box four. Now, you're at box two. You
275. 11:28now know what to look for. Here's the
276. 11:30whole thing in one breath. Loss
277. 11:32aversion, you feel losses twice as hard.
278. 11:35Endowment effect, you overvalue what you
279. 11:38own. Recency bias, the last 30 days
280. 11:41hijacks the next 5 years. Confirmation
281. 11:44bias, your brain hunts for agreement and
282. 11:47validation. One question fixes all four.
283. 11:50Run it on every stock you own. Would I
284. 11:53buy this today at this price if I did
285. 11:56not already own it? Yes, hold. No, sell.
286. 12:00That's the whole skill in one question.
287. 12:02Pick the position that hurts you most.
288. 12:04Hold it up to the question. Would I buy
289. 12:07this today at this price? Whatever you
290. 12:09just answered, that is your homework for
291. 12:12this week. Felt the answer in your gut?
292. 12:14That gut feeling is the whole skill.
293. 12:16Later this week, I am taking these four
294. 12:18biases and pointing them at one stock
295. 12:21most retail owns. Subscribe so that you
296. 12:23do not miss it. Which of the four boxes
297. 12:26did you walk in at? Drop it in the
298. 12:27comments below. As always, be
299. 12:30relentless.