Customer Reviews

The Little Book of Behavioral Investing: How not to be your own worst enemy (Little Books, Big Profits (UK))

5 star:		(7)
4 star:		(5)
3 star:		(3)
2 star:		(0)
1 star:		(1)

 

 

The `Little Book' series continues to produce good work as this 10th installment is an exceptional introductory to our mental traps that we tend to slip into and then often repeat. The book is a quick and enjoyable read and is very clear with only the minimal amount of psychology jargon. This book comes highly recommended for any bookshelf on how to invest better and to make better decisions. Good reading and enjoy the journey of how not to be your own worst enemy :)

A sample of the first few chapters and mental traps are as follows: (seventeen chapters in total)

Chapter 1 - Paralysis Of Empathy Gap
Chapter 2 - Fear/Risk Aversion
Chapter 3 - Overoptimism
Chapter 4 - Authority Respect/Overconfidence
Chapter 5 - Anchoring
Chapter 6 - Information Overload
Chapter 7 - Reason Respecting
Chapter 8 - Conformational Bias


As a side note: I have pointed out in other reviews of additional books below that are in the same genre and which are some of my favorites. So if you like this very good introductory book, then you may be interested in other social influences and hidden traps our minds fall into. If so, I provide the following recommendations: Think Twice (introductory), Influence: The Psychology of Persuasion (polymath classic), How We Know What Isn't So (very good), Mean Markets and Lizard Brains (Hidden Gem), The Psychology of Judgment & Decision Making (Classic), and Poor Charlie's Almanack (Charlie's Insights).

Think Twice: Harnessing the Power of Counterintuition by Michael J. Mauboussin
Influence: The Psychology of Persuasion (Collins Business Essentials) by Robert B. Cialdini
How We Know What Isn't So: The Fallibility of Human Reason in Everyday Life by Thomas Gilovich
Mean Markets and Lizard Brains: How to Profit from the New Science of Irrationality by Terry Burnham
The Psychology of Judgment and Decision Making by Scott Plous
Poor Charlie's Almanack: The Wit and Wisdom of Charles T. Munger by Peter D. Kaufman

Suppose someone handed you a blueprint for making the best long-term investment decisions, based on proven strategies that have stood the test of time. That's what we have here, thanks to the good work of the author, James Montier. This book picks up nicely where Think Twice: Harnessing the Power of Counterintuition left off. By following Montier's engaging and very sensible advice, chances are excellent that you will no longer be one of the world's worst investors (like me, for example).

If you're serious about avoiding all the common pitfalls the typical investor makes, you absolutely should grab a copy of this book; I only wish it had been written about ten years ago, but better "late than never"!

The markets and economy these last few years have been and continue to be difficult to navigate through. It's hard for me to automatically default to being an intermediate or long term buy and hold type investor with lots of the long existing risks being pushed down the road and new risks being introduced via various fiscal and monetary measures taken in the last few years. Like the proverbial general fighting the last war, I don't want to just rely on familiar ways of investing The financial markets and the economy are separate animals so there are opportunities and i want to take advantage of them. The book is about recognizing and then overcoming behavioral biases that most of us have ( I certainly do) and then taking control over what we can control which is ourselves and not the markets. I particularly found beneficial the chapters on having a game plan in place when it can be created during a non-emotional time, and pre-committing to the strategy. This book can be very helpful in showing an investor how to better understand these behavioral flaws that may be preventing them from being better investors, perhaps better than many professionals. The book is very easy to read, enjoyable and makes sense, and has lots of short helpful and verifying anecdotes from successful investors such as Buffett, Soros, Klarman, Berkowitz etc,. I think this book can make me a more successful investor.

Good book that helps to keep in mind ours common behavioral mistakes at investing, as it is a little book, you just should wait to have them listed, but not taken deeply, for me some most useful advises from this little book were: 1.pre-commit, 2.useless of forecasting and 3.have a process in place, but keep it simple so you can follow and tie to it.

James Montier discusses roadblocks to rational decision making and mechanisms to unblock them:

1. Prepare, plan and commit to an approach ahead of time when the alternatives can be clearly analyzed instead of deciding on an approch in the heat of the moment.

2. Human mind can factor in a handful of variables; with more data accuracy remains the same but we're overconfident of our accuracy

3. Avoid forecasts

4. Look for evidence that refutes rather than confirms your hypotheses

5. Separate the facts; resist human tendency to follow a theme / story

6. Focus on improving underlying process / methodology; occassional wrong outcomes are expected and shouldn't derail one from its pursuit

Get out your highlighter, for about 1/2 this book is worthwhile, the other half is just filler. A must for serious investors, for we must know how our mind and emotions work against us while investing.

Montier's book is almost an invaluable investment guide. As other reviews have detailed the book's contents I want to agree that the contents are worthwhile and, at times, amusing. Still, such tips as "don't watch CNBC" or "ignore Jim Cramer" are highly accurate but hardly qualify as a unique or a remarkable perspective.

More to the point, I found the constant use of previous behavioral studies a distraction that ended by simply getting in the way Montier's message. That would have been easily survivable, however, had the book included a closing summary of the author's points. As it is, I felt compelled to go back reread parts of the book 2 or 3 times to attempt to sort out what was essential and what was merely an effort to display the author's cleverness.

In the end, the writing style tends to defeat the book's purpose leaving the reader with an almost invaluable investment guide. Almost doesn't make it...

`The Little Book of Behavioral Investing' looks at traits that may hinder successful investing, as well as those that may aid it. The ideas put forward here are based on value investing principles and if you have read about this before this will be familiar ground. Each type of behaviour is introduced with various games, psychologist examples, experiments and stories to illustrate the points. It shows how to recognise these pitfalls in yourself and how to protect yourself from these behaviours. There are plenty of quotes from renowned and respected investors, like Warren Buffet, to add to the information on offer. There are also some charts and graphs used to clarify certain points but it doesn't get bogged down in jargon or technical data. This was written with the hindsight of the recent credit crunch and mentions the lessons to be learned from the events of the past two years. Overall this is very engaging and whilst some examples used to demonstrate some points are a touch spurious or tenuously linked, this has generally sound investing advice in an easily accessible format. Worth considering if you are interested in investing or are considering starting sometime soon.

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This is a great book that focuses on many common mistakes that investors make. We make these mistakes because our brains are wired to make them. Some of the traits we have that cause us to err include overconfidence, risk aversion and confirmation bias. James Montier also makes the book interesting even if you do not like psychology( which I personally find boring).

I think both a novice and experienced investor would benefit from this book. Even experienced investors could benefit from a lot of the advice and studies Montier provides in the book. I wrote for an investor website and think of myself as more experienced and I benefited greatly from this book.

This book consists of 17 chapters, my favorite was chapter 8 where Montier discusses confirmation bias. Montier ends off the chapter with a great quote from one of the best investor alive Bruce Berkowitz. Here is the quote from Berkowitz regarding his analysis of stocks ""we spend a lot of time thinking about what could go wrong with a company- stagflation, zooming interest rates or a dirty bomb going off. We try every which way to kill our best ideas. If we can't kill it, maybe we're onto something. If you go with companies that are prepared for difficult times, especially if they are linked to managers who are engineered for difficult times, then you almost want those times because they plant the seeds of greatness."


I am a financial columnist for an investor website, I wrote a full book review on the website and my blog. I can not write the full review here because I am a paid columnist and they have exlcusive rights to my articles. If you want to see my full review you can find it through my profile.

This is a true treasure of an introduction to behavioral finance. Montier gives a brilliant, easy-to-read, accessible overview of how to use behavioral-finance knowledge to your own benefit. He uses a combination of logic arguments and concise references to academic research to provide credibility to the contents. The writing style is informal with well-placed humor to further emphasize his messages. It's a quick read you do not want to put down. You will part this book with practical knowledge that will benefit your finances in the long run. A little book for a big difference to your investing behavior.