MarketPsych: How to Manage Fear and Build Your Investor Identity (Wiley Finance) [Hardcover]

Richard L. Peterson (Author), Frank F. Murtha (Author)

Book Description

Publication Date: September 7, 2010 | Series: Wiley Finance (Book 661)

An investor's guide to understanding the most elusive (yet most important) aspect of successful investing - yourself.

Why is it that the investing performance of so many smart people reliably and predictably falls short? The answer is not that they know too little about the markets. In fact, they know too little about themselves.

Combining the latest findings from the academic fields of behavioral finance and experimental psychology with the down-and-dirty real-world wisdom of successful investors, Drs. Richard Peterson and Frank Murtha guide both new and experienced investors through the psychological learning process necessary to achieve their financial goals.

In an easy and entertaining style that masks the book’s scientific rigor, the authors make complex scientific insights readily understandable and actionable, shattering a number of investing myths along the way. You will gain understanding of your true investing motivations, learn to avoid the unseen forces that subvert your performance, and build your investor identity - the foundation for long-lasting investing success.

Replete with humorous games, insightful self-assessments, entertaining exercises, and concrete planning tools, this book goes beyond mere education. MarketPsych: How to Manage Fear and Build Your Investor Identity functions as a psychological outfitter for your unique investing journey, providing the tools, training and equipment to help you navigate the right paths, stay on them, and see your journey through to success.

Editorial Reviews

Review

"The market is flooded with books on investor psychology, but most only outline the various ways we screw up with our investments. This is the first book that identifies the root causes and gives a variety of practical, imaginative ways to heal thyself." (Kiplinger's Personal Finance, December 2010)

From the Inside Flap

Investing well is not about the markets—it's about you. The markets will do what they do, which is fluctuate. The question is, as the markets fluctuate, what do you do?

While you may not think that your investment performance is affected by who you are, think again. Recent research has uncovered startling information regarding the relationship between who you are, how you invest, and what that ultimately means for your wallet.

For the past two decades the psychological mistakes of investors have been rigorously defined by experts in the fields of behavioral finance and experimental psychology. The problem with this is that investors haven't been told what they can do to overcome these innate errors of judgment. It's time to find an appropriate road to recovery, and that road starts by understanding who you are as an investor: your Investor Identity. That's why authors Richard Peterson and Frank Murtha of MarketPsych LLC—an innovative organization that offers psychology-training services for the financial industry—have created this timely guide.

Written with every investor in mind—from mutual fund dilettantes to penthouse portfolio managers—MarketPsych will put you in a better position to improve your investing by helping you honestly answer questions such as: Fundamentally, why am I investing? Who am I trying to be when I buy or sell stocks? What are my deeper "emotional" objectives? How am I deceiving myself in the markets?

And while the book does not recommend a specific method of investing, it does assist you in understanding your financial personality style, emotional triggers, values, and assumptions, and it reveals how to invest comfortably within your newfound investor identity.

Investing appears to be about the markets, but it's not, it's really about you. By addressing the major psychological underpinnings of strong and weak investment performance—from personality traits and emotion management to values and beliefs, thought traps, and stress management—and showing you how to institute lasting behavioral change and maintain motivation in pursuit of your goals, MarketPsych will improve your investing mindset and help you excel even in the toughest markets.

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Product Details

• Hardcover: 240 pages
• Publisher: Wiley; 1 edition (September 7, 2010)
• Language: English
• ISBN-10: 0470543582
• ISBN-13: 978-0470543580
• Product Dimensions: 6.4 x 0.9 x 9.1 inches
• Shipping Weight: 1 pounds (View shipping rates and policies)
• Average Customer Review: 4.7 out of 5 stars  See all reviews (10 customer reviews)
• Amazon Best Sellers Rank: #241,987 in Books (See Top 100 in Books)

Most Helpful Customer Reviews

8 of 8 people found the following review helpful

5.0 out of 5 stars Very Useful and Surprisingly Engaging December 2, 2010

By Davenport

Format:Hardcover

I don't have a lot of investing experience. I have a 401K and in the last few years I've started putting money into the markets. But I've been looking into learning more about the stock market. A friend recommended I pick up MarketPsych. I'm glad he did.

The book was very different than I expected. For one thing it's genuinely funny. I laughed out loud on multiple occasions. (For example comparing market moves to your "idiot friend" in high school who used to get you in trouble.)

It also made me ask a lot of questions about myself that I would never have thought to ask that were really valuable such as what are my investing values, where are my blind spots, and what specific life circumstances do I want my investments to get me in the future?

The authors do a great job of presenting the material in a way that is challenging, but also entertaining. It makes me wish I had read this book before I started putting money into the markets. It taught me a lot, not only about what mistakes I make (im my case investing impulsively and holding losing positions too long), but WHY I do it and how to avoid doing it in the future. I feel like if I had a lot of the insights it gives, I'd have saved myself a lot of painful mistakes.

In short, I recommend this book strongly. It's a very practical investing book and surprisingly fun to read.

5 of 5 people found the following review helpful

5.0 out of 5 stars MARKET PSYCH FOR THINKING PEOPLE December 18, 2010

By Laurence Brody

Format:Hardcover|Amazon Verified Purchase

MARKET PSYCH is a book for investors, which can give you a level of protection that a financial professional may not able to offer. Through the ages dating back to Ancient Greek philosophers, mankind has b been encouraged to "know thyself." Nevermore important in the mysterious mechanism of investing has it been so important to know one's self. And this admonition has been repeated throughout history. Even Clint Eastwood has opined, "A man's got to know his limitations."

The investment world as the authors point out could be given the nomenclature of the speculative world more accurately. You are playing with the house, and the house has all the advantages, although many people "invest" to have something to talk about whether buying speculative stocks, bonds or real property most of us have to invest in order to have funds to live on after our productive employment years come to an end. In truth it is a much more serious matter, and most people know that Social Security will no longer support the golden years. So it will be up to you. That's why the fortunate readers of this book have the opportunity to gain advantage. It is a chance to refine one "self" as a tool in managing one's future.

I have often wondered how the name "securities "came about, when I learned from Helen Keller, in reality, there is no such thing as security....

"Security is mostly a superstition
It does not exist in nature
Neither do the children of men
Experience it often
Avoidance of danger is no safer in the long run
Than outright exposure
Life is either a daring adventure or nothing"

The authors, Peterson and Murtha attack this issue directly addressing the fear that most investors, individual or profession have suppressed to either conscious or unconscious fear, which impairs their judgment on an issue so critical to one's future.

I think this book is essential for so many who rely on their own overconfidence to take them through to a "secure future." I think anyone planning a trip to the jungle or climbing a mountain, or even taking a vacation, would want to rely on and hone their own judgment in planning a venture with some degree of risk.

This book lays out chapter by chapter the steps needed to optimize your investor
Self- awareness. It is pretty common knowledge that many talented people wind up in the poor house at the final chapters of life having lived short term comforts. It is also known that it is hard to see your own self, let alone identify your blind spots and be able to work on them. In this world, one will need a lot of fore-vision to come out whole. Even highly trained psychiatrists and psychologists I have known, have their blind spots, despite their expertise in their professional field. They are no match for the investment professional.
Furthermore, our culture has evolved to accept both willful and naďve deception and lying as part of the acceptable culture. It is possible that a trusted and honest advisor could also be deceived. So then the book comes back to you're as an investor to hone your own self through self-awareness. And, therefore your identity as an investor has to evolve, and you will know what you are doing to your "self" and your loved ones, all the better.

I found the common sense approach of the book allowed them to take my hand and gently guide me through the steps toward identifying repressed fear and towards a more confident identity as an investor/speculator. To me, the importance of this book is even more important as government evolves as an entity to take from your rather than to provide for you. Ask a young person what they expect to get from government or Social Security!

Furthermore the pressures of media and the parade of experts in finance offer potential confusion. Who do you follow or should you avoid joining the "herd" or just bury your head in the sand. I liked Chapter 2 on Investor Identity. The easy examples and analogies crystalize the concepts and points the authors want to impart to the reader. This gets you thinking about your "self", your goals and where you want to go and the "risks" rather than the rewards of how you get there. It's all important and worth consideration.

One thing I found helpful, is the many questions that the authors ask the reader to contemplate. Rarely does one ask questions of themselves, but asks questions about the investment. To me, this is quite important and one of the elements that differentiates the approach of this book from the many other " Behavioral Finance" books I have read.

I don't want to steal the thunder of this book, but the authors have the ability to understand the reader and his/her limitations as a player in the investment/speculation world. You have to read it and put yourself into it, and be willing to examine yourself.
The authors know the investment world and the people world, and can help you to understand your identity as an investor.

This book, in contrast to others I have read on investing will prepare you to be a more effective self in the investing/speculating world. It can also be read and applied by investment professionals. An old axiom of the investment world, like "customer's man" and " know your customer" have now evolved into "know your investing self" thanks to these kind and brilliant authors.

The authors use a method similar to the Socratic, to teach through self -examination.

This book is a big winner. Read more ›

8 of 10 people found the following review helpful

5.0 out of 5 stars Practical Complexity September 15, 2010

By Monk

Format:Kindle Edition|Amazon Verified Purchase

I found this work by Richard Peterson and Frank Murtha to be a very valuable contribution to my perspective in thinking about ways to enhance the effectiveness of my investment decision process....and as an advisor, good ideas aimed at improving my ability to constructively help improve client process as well.

While it clearly has evolved from a substantial body of research, the presentation style and concise delivery are refreshingly divergent from a number of the more scholarly (and obtuse) works I've read.

If you are looking for thoughtful insights about building a better mental mousetrap as an investor, you should give this a read.

4 of 5 people found the following review helpful

4.0 out of 5 stars Another Book Review from the Aleph Blog February 12, 2011

By David Merkel

Format:Hardcover

I am no great fan of psychology. When I was selected for jury duty, 20 years ago, I was the first peremptory challenge because I said that I would not take the word of the psychologist as expert testimony, but rather would consider the opinion of a man on the street as more valuable than that of a psychologist.

There is one place where make an exception, and that is the economics of risk literature. Daniel Kahneman and Amos Tversky, great. Richard Thaler, uh-huh. Behavioral economics? Yes, I am there.

The easiest way to improve the returns of average investors is to train them to think differently. Instead of looking at whether the prices have gone up or down, and getting excited or scared, they need to begin to think in terms of what is the future cash flow yield of the investment that I am pursuing? Past success is not a reason to buy and past failure is not a reason to sell. Focus on maximizing future cash flow yields, and you will do well.

But that's hard to do; training the mind to think rationally about investments and take the blood out of it is difficult for average men to do. As for me it took 5-10 years for me to train myself not to get emotional over investing. That's why I don't look down on people who make mistakes investing over their emotions - they just need better training and they don't know where to get it.

The book MarketPsych could help them get it. The first thing that it encourages people to do is to understand themselves. You must understand yourself so that you can invest in a way that is consistent with your emotional makeup. You can't be investor, if you can't manage fear. You can't be an investor, if you can't manager greed.

Why do you do the things that you do?... The book MarketPsych has number of exercises that help an investor unravel why he thinks a certain way.

The book does not take a position on questions like value versus growth, or behavioral economics, or any of the anomalies in the market such as momentum. Rather, it tries to get the investor in touch with himself, so that he can react rational and to invest situations rather than out of fear or greed. It encourages investors to focus on things that are known, rather than speculation. It urges them to consider what they need the money for, rather than always seeking for more, more, more.

MarketPsych is good at describing the mental traps and pitfalls that investors suffer. Though I am past all of those traps and pitfalls, nonetheless, I remember what it was like to get past the, and this book would've helped me get past them faster.

Quibbles

I take issue with some of the meditation exercises in the back of book because I believe they are harmful not helpful. I also don't go in for visualization exercises; I don't believe in pretending. Rather, one should develop competence and understand the markets exceptionally well.

Who would benefit from this book:

Almost any investor who is frustrated with his performance, particularly from bad timing , would benefit from this book. Read more ›