20/20 Money: See the Markets Clearly and Invest Better Than the Pros

Overview

A majority of investors—both experienced professionals andaspiring individuals—are blinded by conventional investingideas that just don't work. The fact is that many of us end upmaking costly mistakes because we don't understand the basic waysmarkets work.

What you need to succeed is a new investing lens, one thatallows you to see things in a different way than most—one thathelps you think differently. That's why Michael Hanson, a senioreditor ...

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Overview

A majority of investors—both experienced professionals andaspiring individuals—are blinded by conventional investingideas that just don't work. The fact is that many of us end upmaking costly mistakes because we don't understand the basic waysmarkets work.

What you need to succeed is a new investing lens, one thatallows you to see things in a different way than most—one thathelps you think differently. That's why Michael Hanson, a senioreditor and columnist for Fisher Investments' MarketMinder.com, haswritten 20/20 Money.

While understanding economic fundamentals and analyzing data areimportant aspects of investing, without a clear vision andwell-developed philosophy to help drive decisions, you can fallshort of achieving your investing goals.

Through an interdisciplinary discussion ranging from stockmarket theory, mathematics, and history to systems theory,psychology, and science, 20/20 Money—the latest title fromFisher Investments Press—ventures outside the narrow realm ofinvesting to help you gain the focus needed to help you in yourefforts to protect your portfolio and produce superior long-termreturns in even the most difficult market conditions. Page by page,you'll discover how to:

  • Use current research in neuroscience and behavioral psychologyto understand how your perceptions and natural emotions are oftencontradictory to your best financial interests
  • Apply the power of self-awareness and self-observation to builddiscipline and avoid common investing pitfalls
  • Navigate the media and gauge investor sentiment—not only toget the information you need, but also to ignore distractingnoise
  • Analyze the stock market and economy as a complex, emergent,adaptive system (CEAS)
  • Forecast stock markets in terms of probability and use patternrecognition
  • Create a framework—or set of heuristics—for managingyour own portfolio
  • Recognize risk in its many forms and overcome obstacles duringturbulent times

Along the way, you'll also discover some of the most successfulstrategies for thinking and learning, and how they can be appliedto better investing.

If you intend on making money in the markets, having 20/20investing vision can help. Filled with in-depth insights andpractical advice, 20/20 Money puts this discipline in perspectiveand shows you how making the right choices can make all thedifference in today's dynamic market environment.

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Product Details

  • ISBN-13: 9780470285398
  • Publisher: Wiley
  • Publication date: 6/9/2009
  • Series: Fisher Investments Press Series, #8
  • Edition number: 1
  • Pages: 304
  • Product dimensions: 6.30 (w) x 9.10 (h) x 1.20 (d)

Meet the Author

Michael J. Hanson has been an investment banker as well as a stock analyst and is currently a senior editor and recurring columnist at Fisher Investments' MarketMinder.com. He has lectured on topics in money management at the Haas School of Business at the University of California, Berkeley, and speaks regularly throughout the country on a variety of topics, including capital markets and behavioral finance.

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Table of Contents

Acknowledgments xi

Introduction xiii

Chapter 1 Investing Is a Science 1

Apollo's Arrow Shot Crooked 2

Dionysus—More Than Just a Good Vintner 3

Use the Method, Not the Dogma 5

Careful with Categories 13

Could Math Be Wrong? 15

Reduction: Why You Can't Quantify Everything 19

Chapter 2 Investing Is a Discipline 27

Discipline, Discipline, Discipline 29

Sagacity: Seeing Isn't Believing 41

Understanding and Being Curious 48

Chapter 3 Human Behavior 51

Brain Basics 53

Brains on the Market 64

My, What a Terrible Memory You Have! 71

Bad Behavioral Finance 76

Behavioral Miscellany 79

Chapter 4 Sentiment and the Media 83

Sentiment Basics 85

News and the Media 90

What's Their Motive? 98

Tips and Tricks to Navigate the Media 100

Metaphors We Invest by 106

Chapter 5 How Stock Markets Really Work 113

Capitalism by Any Other Name 114

It's Complicated . . . A Crash Course in CEAS 118

The New Golden Rule 130

Oldest and Still the Best: Supply and Demand 139

Chapter 6 Forecasting, Part 1—The Principle ofProbability 147

Forecasting Is Strange Alchemy 148

Types of Predictions 150

Probability Theory, or How Markets Are Nothing Like Coin Tosses154

The Biggest Problem of Them All 163

Investing Lessons from Probability 165

Looking Ahead . . . 170

Chapter 7 Forecasting, Part 2 —Recognizing Patterns173

A Pattern by Any Other Name 174

Stock Market Patterns 175

Patterns Through the Noise 179

It's a Game of Relative Expectations 181

Back to the Future: Using History to Find Patterns 187

Three Big Drivers 191

An Optimistic Note on Future Patterns 195

Chapter 8 Practical Portfolio Management 197

The Virtues of Heuristics 198

Goal Setting 199

Personal Goals 201

Portfolio Goals 205

The Top-Down Philosophy 210

Miscellaneous Heuristics 223

Chapter 9 The Nature of Risk and Navigating Markets inTroubled Times 229

Risk and Uncertainty 231

Financial Risk, or What Happens When You Assume 233

In Troubled Times 239

Parting Thoughts 253

Notes 255

Selected Bibliography and Further Reading 259

About the Author 269

Index 271

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