Ben Graham, the father of value investing, once said: "The investor's chief problemand even his worst enemyis 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 strategythat is, do your investment research while you are in a "cold" rational state, when nothing much is happening in the marketsand 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 controlsuch 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 investmentsyourself.
"The Little Book of Behavioral Investing is an important book for anyone who is interested in understanding the ways that human nature and financial markets interact."
—Dan Ariely, James B. Duke Professor of Behavioral Economics, Duke University, and author of Predictably Irrational
"In investing, success means being on the right side of most trades. No book provides a better starting point toward that goal than this one."
—Bruce Greenwald, Robert Heilbrunn Professor of Finance and Asset Management, Columbia Business School
"'Know thyself.' Overcoming human instinct is key to becoming a better investor. You would be irrational if you did not read this book."
—Edward Bonham-Carter, Chief Executive and Chief Investment Officer, Jupiter Asset Management
"There is not an investor anywhere who wouldn't profit from reading this book."
—Jeff Hochman, Director of Technical Strategy, Fidelity Investment Services Limited
"James Montier gives us a very accessible version of why we as investors are so predictably irrational, and a guide to help us channel our 'Inner Spock' to make better investment decisions. Bravo!"
—John Mauldin, President, Millennium Wave Investments
If you want a short and to the point guide to how investing (and investors) really work, then this is the single book that you absolutely need.Published 2 months ago by B. Morris
I stopped reading this book after a few chapters because of the horrible writing style.
He insults readers who are not familiar with the Star Trek characters he cites... Read more
So very true.... how people behave and why while investing. Love this book, great insight to correct bad behavioral investing.
This book is well worth your money.
It all begins with the most overwhelming fact that Montier is a great writer. On top, he is a great thinker and has experience to boot. Read morePublished 9 months ago by NJ
Excellent outline regarding behavioral finance and economics.Published 10 months ago by Donald Wettstein
For such a technical subject, the length of the book is ideal as not to become boring. Very good on the subject, must have knowledge for every trader/investorPublished 11 months ago by dimitrios papafotis
Monitor does an excellent job of explaining why we make poor investment (and life) decisions. More importantly, he gives excellent advice on how to minimize the mistakes. Read morePublished 12 months ago by estrogen
This book really taught me the need to be disciplined and not be swayed by emotions when it comes to investing. So many examples quoted in the book that have happened to me before. Read morePublished 12 months ago by Edmund
Bought this because I didn't want to commit to his much larger text on same subject. It was a really good choice. Read morePublished 14 months ago by JC