The Little Book of Behavioral Investing: How not to be your own worst enemy

( 6 )

Overview

Ben Graham, the father of value investing, once said: "The investor's chief problem?and even his worst enemy?is likely to be himself." Sadly, Graham's words are still true today. Bias, emotion, and overconfidence are just three of the many behavioral traits that can lead investors to lose money or achieve lower returns. Fortunately, behavioral finance, which recognizes that there is a psychological element to all investor decision making, is now firmly embedded in the mainstream of finance. Applying behavioral ...

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Overview

Ben Graham, the father of value investing, once said: "The investor's chief problem—and even his worst enemy—is likely to be himself." Sadly, Graham's words are still true today. Bias, emotion, and overconfidence are just three of the many behavioral traits that can lead investors to lose money or achieve lower returns. Fortunately, behavioral finance, which recognizes that there is a psychological element to all investor decision making, is now firmly embedded in the mainstream of finance. Applying behavioral principles to an investment portfolio can help investors avoid some of the mental pitfalls that so often cost them, and financial institutions, billions.

In The Little Book of Behavioral Investing, behavioral finance expert James Montier takes you on a guided tour of the most common behavioral challenges and mental pitfalls that investors encounter, and provides you with strategies to eliminate these traits. Along the way, he shows how some of the world's best investors have tackled the behavioral biases that drag down investment returns, so that you might be able to learn from their experiences.

Page by page, Montier explains the importance of learning to prepare, plan, and then commit to a strategy—that is, do your investment research while you are in a "cold" rational state, when nothing much is happening in the markets—and then pre-commit to following your analysis and action steps. He also stresses the folly of trying to forecast what the markets will do, and reveals how the idea of investing without pretending you know the future gives you a very different perspective. Throughout the book, Montier stresses why the need to focus on process rather than outcomes is critical in investing. Focusing upon process, he shows, frees us up from worrying about aspects of investment that we really can't control—such as returns. By focusing upon process, we maximize our potential to generate good long-term profits.

The Little Book of Behavioral Investing offers a range of time-tested ways to identify and avoid the pitfalls of investor bias. By following these simple strategies, you will learn to overcome your own worst enemy when it comes to investments—yourself.

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Product Details

  • ISBN-13: 9780470686027
  • Publisher: Wiley
  • Publication date: 2/2/2010
  • Series: Little Books, Big Profits (UK) Series , #35
  • Edition number: 1
  • Pages: 219
  • Sales rank: 209,833
  • Product dimensions: 5.30 (w) x 7.10 (h) x 4.10 (d)

Customer Reviews

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( 6 )
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Sort by: Showing all of 6 Customer Reviews
  • Anonymous

    Posted December 23, 2013

    A look in the mirror

    We have met the enemy and he is us. Good little book of the series on keeping your emotions in check.

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  • Posted April 17, 2010

    very compact but easy to read

    simplifies the field without talking down. Also provides way to bypass mental blindspots

    Was this review helpful? Yes  No   Report this review
  • Posted March 20, 2010

    Ubiquitous trading book

    The guy is a knowledgeable trader. However, like most trading books, this is probably a waste of money for most readers interested in trading.

    Was this review helpful? Yes  No   Report this review
  • Anonymous

    Posted November 12, 2010

    No text was provided for this review.

  • Anonymous

    Posted March 16, 2010

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    Posted July 31, 2011

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