Learning to Live With Investment Risk

When stock markets get volatile, and asset prices fall, just learn to look the other way, says Morningstar's Ben Johnson

Ben Johnson 11 January, 2019 | 8:38AM

surviving volatility stock market learning to live with risk

In Thinking, Fast and Slow, Nobel Memorial Prize in Economic Sciences laureate Daniel Kahneman summarizes decades of work he has done to better understand the way that we think. The book’s title alludes to the two speeds, or in Kahneman’s terms, systems, that we use to process information. System 1 is fast, System 2 is slow.

System 1 allows us to respond quickly to external stimuli with limited information. System 2 is more pensive and calculated. Each has its own benefits and drawbacks and together they can help explain the various cognitive biases that Kahneman and his close collaborator Amos Tversky documented.

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About Author

Ben Johnson

Ben Johnson  is director of passive funds research at Morningstar.

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