Why You Should Use Market Fear to Your Advantage

Have no fear, a market expert is here.

Charlie Bobrinskoy, vice chairman and portfolio manager at Ariel Investments, sat down with TheStreet to discuss the anniversary of the recession and how investors can take control of market fear, instead of letting the markets control them.

"...The takeaway is that you have to be greedy when others are fearful and you have to be fearful when others are greedy. You want to buy what others are selling and sell what others are buying. And that is very hard to do when you're in a cocktail party and everybody is saying to buy apple or buy Amazon. That's probably not a good sign. When everybody is saying CBS CBS has done as a company, that probably means there's an opportunity," he said.

But, there's more than fear to be aware of. Investors need to understand their bad investing habits and how those can harm them.

"The thing that we did at Ariel was to put in place a devil's advocate on every name we own. A lot of these behavioral finance tendencies come from the tendency to overvalue what you own. This is called the endowment effect. And what we did was put in place a devil's advocate on every stock whose job it is to push back on the thesis to push back on the valuation," he said. That's very helpful because in any organization, it's always hard for me to tell you why I think you're wrong. That produces a lot of tension. But if it's my job to push back on your thesis, then we have a much better conversation. And some of this confirmation bias can be managed."
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