Fung C. F.

A couple of responses.

If you read the text following Concept 3 you will see that we are referring to the necessity of dealing with investor emotions at every stage of the planning/investing process. That is, at each stage if the investor makes emotional decisions, long horizon is reduced.

And no amount of fancy portfolio construction or investment management can make up for these devastating mistakes. That is why emotions are the most important aspect, by far, for building wealth.

Second comment, markets are no more correctly priced in the long run as they are in the short run. Emotional crowds dominate in both situations.

It is true that underlying economic (company) growth acts as a guide-wire for the market (stock), but swings away from this economic pull are large.

The best we can say is that the market wanders higher over time because the economy grows over time. Believing the market correctly prices securities in the long run is pure fantasy.