Since many of the market’s long-term rewards come from the risks you’re willing to take, making serious money usually hurts — at least when it appears to be out of favor with the “consensus.” Morgan Housel’s recent blog post, “Every Great Investment Hurts,” offers a fresh perspective on the source of that pain.

To trade profitably in highly competitive markets, you not only must make the right calls on future pricing, you’re best off making them when most other investors think you’re wrong. That’s what this simple diagram from Housel’s post suggests.

How do you end up in that profitable sweet spot? You can try guessing correctly almost all the time (super hard). Or you can embrace evidence-based investing, which should guide you toward being correct more often than not … if you stick with your plans. That can still be hard, but at least the odds are stacked in your favor.

Have you ever wondered what Batman & Robin would be like if Batman were the understudy to a more famously popular Robin? It would probably be a lot like the real-life dynamic duo of Warren Buffett and Charlie Munger.

As Chairman of Berkshire Hathaway, Buffett is the more familiar figure. He’s been featured in his own HBO special. He’s got his own “Oracle of Omaha” nickname. He’s chairman of Berkshire Hathaway. Munger is vice-chair of the same, and often described as Buffett’s sidekick, even though he’s the elder of the two, is also an astute Omaha native, and was running his own successful holding company while Buffett was still learning the ropes. As Buffett himself describes of Munger:

“[W]e’ve never had an argument. When we differ, Charlie usually ends the conversation by saying: ‘Warren, think it over and you’ll agree with me because you’re smart and I’m right.’”

So who’s the real “Batman”? Let’s turn the spotlight on Munger for a change, showcasing some of his “elementary worldly wisdom” – a phrase Munger uses to describe how he builds models for converting isolated insights into applicable common sense.

Translating the complex into useful ideas. This is something we like to do here at Hill Investment Group as well. To get a sense of how a master like Munger does it, here’s a 15-minute YouTube video with excerpts from a talk on human psychology, which Munger delivered at Harvard in 1995.

Munger uses approachable analogies ranging from Pavlov’s dogs and New Coke, to target shooting and gallbladder surgery to entertain and inform us with “how humans trick themselves into making terrible errors of judgment.”

In our best judgment, Munger is well worth watching and reading, with plenty more elementary worldly wisdom to share. If that’s of interest, let us know and we’ll be glad to tell you more.

In the horse-and-buggy days, it was common to put blinders on your trusty steeds. It helped them narrow their frame of reference to the job at hand … or at hoof.

Even today, blinders remain a great strategy for those Budweiser Clydesdales. But for us humans, a similar behavioral bias known as narrow framing is more likely to knock us off-course than keep us sensibly invested.

What am I talking about? UCLA’s behavioral economist Shlomo Benartzi recently published an insightful Wall Street Journal piece on the subject. In it, he describes narrow framing as “a tendency to see investments without considering the context of the overall portfolio.”

Benartzi explains:

“The first [narrow framing] mistake involves people taking too little risk, which often leads to lower investment returns. When we engage in narrow framing, we tend to focus on short-term losses. … The second mistake involves people taking on too much risk without realizing it. When we don’t think about our entire portfolio, it’s easy to overlook the fact that many of our different investments might fall or fail for similar reasons.”

In other words, overly narrow framing can result in ignoring instead of accurately assessing your own and the market’s landscape of inherent risks and potential rewards. You end up investing like a horse with blinders on – but nobody is steering the cart.

Fortunately, Benartzi offers a few practical solutions, which just happen to coincide with our way of doing business here at Hill Investment Group.

“Rely on information that reflects the biggest possible picture,” he advises, but “remember not to look at it too often.” Sounds a lot like our motto: Take the Long View®, don’t you think? Helping families view their big picture is core to our approach.

Benartzi also notes that today’s aggregation software – like our recently released HIG’s Client Portal – makes it easier than ever to see the grand scheme of things at a glance.

If you’ve never had the chance to catch the Budweiser Clydesdales in action, I recommend it highly. (No, a Super Bowl commercial doesn’t count.) But when it comes to your investments, let your advisor and today’s technological tools help you eliminate your narrow-framing blinders. Being blinded will only lead you astray.