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VINE VOICEon December 17, 2007
The last 5 years I have read many research papers on behavioral finance, so I have a fair amount of knowledge about its findings.

I first read Pompian's book Behavioral Finance and Wealth Management, and then a few weeks later read Jason Zweig's Your Money and Your Brain.

Pompian's book wins hands down from a practical viewpoint......how you can use behavioral finance findings as an investor or investment advisor. Pompian lists all 20 common biases, and then gives examples of how to deal with them. I also enjoyed his section on using Briggs Myers test results coupled with behavioral finance principles.....to develop better financial plans which fit people better.

Zweig's book is a fascinating read.......but when I got done......my question was.....How do I apply these behavioral finance findings to my investments or my client's financial plans? I would have to re-read Zweig's book......and develop the practical uses myself from his book. Pompian has already put this together for you in his book.

If you have never been exposed to behavioral finance, then maybe reading both books is a good idea. You can get a general over-view by reading Zweig's book first......then get practical advice on how to apply the findings from Pompian's book.

It is interesting that Zweig's book at $17 has an Amazon sales rank of 2,075......and Pompian's book at $38 is only ranked 38,940. I have always enjoyed reading Zweig's columns in Money magazine. It is interesting to see where future research in behavioral finance is headed in Zweig's book.......but in my opinion; you get more practical advice (or value) for the dollar from Pompian's book than Zweig's book.

To compliment this book.....I would suggest a couple good books on index fund investing and asset allocation.

The Richest Man in Babylon
Bogle on Mutual Funds: New Perspectives for the Intelligent Investor
The Millionaire Next Door
The Four Pillars of Investing: Lessons for Building a Winning Portfolio
A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing, Ninth Edition
The Coffeehouse Investor: How to Build Wealth, Ignore Wall Street, and Get On With Your Life
The Bogleheads' Guide to Investing
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VINE VOICEon September 4, 2007
The above is the premise of Jason Zweig's Your Money & Your Brain. As the research continues to mount that we are indeed more hardwired like our animal ancestors than we care to admit, it helps to know these hardwired systems in ourselves to more understand our response mechanisms that can and do trigger our emotions and ultimately our actions. To assist in this effort, the book highlights and goes into some detail of the more recognized emotions like Greed, Fear, Regret, and Confidence of which all play on our performance in life, as well, and even more so in optimizing our wealth in the investing process. Since the investment world and markets themselves are full of triggers that fool our brains into taking actions that in the end are not good for wealth optimization, this book will help you understand some of these triggers and hopefully avoid some of the actions they promote.

It was a treat to read this very well written (read as not too technical) on the pitfalls of our decision making and how we sometimes unknowingly do things that are against our own best interests. To illustrate with one of the topics of Confidence, we are hardwired to be confident because if we weren't we would more often then not be paralyzed to never be able to make a decision. However; when it comes to investments, we are mostly too confident in our own abilities which itself leads to overconfidence. For example, we believe that our own selected lottery ticket has a better chance of winning than someone else's selected ticket even though all of us know that the odds are the same for everyone. But when asked to give your ticket up for someone else's, the response is usually -- no way. This fact has been tested over and over with the same conclusion that we believe our own cognitive skills or luck is better than someone other than ourselves. In the investment world, the path to ruin is full of disasters where investors were overconfident. Let us just be reminded of the ".com" boom or Long Term Capital Management episode.

Or let's take another look and topic in the book of Risk. What is your Risk tolerance? This may entirely depend on what your mood was when the question was asked, or what was the last color you saw prior to being asked, or more importantly of how the question was asked. For example, if you were asked that a said portfolio has a 78% chance of meeting your financial goals does this meet your risk tolerance? You may answer in the affirmative, yes, that this is a good risk profile for me. However, if you were told that said portfolio has a 22 out of 100 chance of not meeting your financial goals and you may be eating beans for the next 10 years, your risk profile may have changed drastically though these are exactly the same. Its all in the framing.

As you move on and educate yourself on the other hardwired triggers like Fear, Regret, Greed, plus others, you should be in better shape to improve your investment results, or at a minimum to at least recognize some of the pitfalls. All in, required reading if you're a serious investor or have not read some other excellent books on the subject, such as, Mean Markets and Lizard Brains by Terry Burnham, Psychology of Judgment by Scott Plous, or How We Know What Isn't So by Thomas Gilovich.

Side note: The footnotes and background information are very well documented in the back. However, some of the figures referenced are in the middle of the book. For example, when I read (See Figure 3.1) and could not find it, I thought that they had left it out though it was between Chapters 6 & 7 in a separate section. This did not distract from the book too much as it was probably a technical issue to place all color pictures in one section, but thought it odd of not telling the reader up front.

Though not to leave with a negative feeling, with praise from the likes of Daniel Kahneman, Bill Miller, and David Dreman -- it is hard to go too wrong and I believe Jason Zweig has indeed succeeded. So enjoy an educating and fun read :)
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on September 4, 2007
As the title reveals, this book is about the inner workings of the investing brain. It not only explains the mistakes we all make, it takes the next step by telling us what we can do to become better investors.

First of all, this book will dispel any notion that our brains are predisposed to act only in ways that are about increasing wealth. As it happens, our financial decision-making is more about intangibles, such as avoiding regret and achieving pride. Never underestimate the value that comes with bragging about some brilliant investment to anybody who will listen.

Mr. Zweig explains that we really have two brains. Our reflexive brain gets the first crack at decision making, and is essentially based on intuition or how we feel. Our reflective brain, on the other hand, is more logical. The problem is that we usually don't know which part of the brain is at the switch when we make any decision. One key to maximizing wealth is to give the reflective brain some time to respond, and not to react immediately to our gut instinct.

Just when I thought the book couldn't get any better, I read the last chapter on "happiness." It explored the relationship between money and happiness. In spite of the lip service that is paid to believing that money doesn't buy happiness, we all seem to be on the treadmill of acquiring as much of it as we can. The disappointment sets in when we find that raise we got, or that windfall profit, doesn't actually make us happier for long periods.

In summary, content is fascinating but it is Mr. Zweig's writing style that kept me reading when I could barely keep my eyes open. It is a rare gem in its genre, a book that will change your way of investing and your life, and be fun to read.
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on September 9, 2007
In my professional life I advise high net worth individuals on making smart decisions with their money. I've read a number of the behavioral finance books but this one is different. It was fascinating to read how our brains work and it explains a lot of what I've observed in my clients and in myself. I plan to buy several copies as gifts for my clients.

I would have given the book 5 out of 5 except that it seemed like a number of the studies and stories in the book were mentioned more than once or they were just similiar. Either way, some of it got a bit tedious.
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on November 14, 2007
Controlling one's emotions is a major key to successful money management. No one who has withered under the emotional pressure of making split second investment decision will argue that it is not.

Financial writer Jason Zweig combining concepts in neuroscience, economics and psychology to explain how our biology drives us toward good or bad investment decisions. He argues our brains lead us to self-deception. We are oath to admit our lack of financial knowledge. We overestimate our ability to perform. We believe we're smart enough to forecast the future even when we have been explicitly told that it is unpredictable. Our impetuousness leads to mistakes of action rather than inaction. In short, although we see ourselves as rational beings; we make irrational investment decisions.

His book blends tales from his visits to neuroscience labs with stories of investing mistakes. From them he pulls lessons and counsel on how investors can make more profitable investment decisions. They are:

1. Take a global view.
2. Hope for the best: expect the worst.
3. Investigate; then invest.
4. Never say always.
5. Know what you do not know.
6. Past is not prologue.
7. Weigh what they say.
8. If it sounds too good to be true, it probably is.
9. Costs are killer.
10. Eggs go splat.

Another that should be added to the list is The Paradox of Choice: Why More Is Less. More general in its approach, it cites many of the same studies. Schwartz, a Swarthmore College professor, cited research from psychologists, economists, market researchers and decision scientists to make five counter-intuitive arguments: We would be better off if we:
1. Voluntarily constrained our freedom of choice.
2. Sought "good enough" instead of "the best."
3. Lowered our expectations about decision's results.
4. Made nonreversible decisions.
5. Paid less attention to what others around us do.

Thoroughly researched, Your Money and Your Brain needs to be studied by anyone seeking to make wiser and more profitable investment decisions.
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on July 27, 2014
There's some halfway interesting stuff here about how the brain works, how the intuitive ("reflexive") brain works with the logical ("reflective") brain, and how over-reliance on one or the other can get you in trouble when investing. But this would have made a nice magazine/newspaper article: the neuroscience is covered in "Gosh, isn't that amazing!" tones, and the investment guidance isn't particularly new or wonderful.

One particular example made me think that the author doesn't quite understand what he's writing about: He quotes some research at U of Chicago (Hogarth/Einhorn) in which participants are asked to select the minimum information that would support a hypothesis. We're told "... an expert claimed that the market always went up after he predicted that it would rise." Then we're asked what's the minimum information we need to verify this claim. Choice 1 is "what the market did after he predicted that it would rise"; choice 4 is "what he predicted before the market fell". Now Zweig crows that many people got it wrong by saying #1 was sufficient information, where #1 & #4 are both needed. Unfortunately, he's flat wrong -- #1 is indeed sufficient information. The expert hasn't claimed that he can predict drops correctly, or even that he can predict all increases. He simply is saying that all his "up" predictions are 100% correct, so all we need to do is to verify that prediction. Zweig then waxes on about falsification, but by now it's clear he doesn't quite get how to formulate the falsifiable hypothesis. (I'd surmise that he read the research paper wrong, because UChicago people would know better.)
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on August 3, 2012
If you ever wondered what parts of the brain are activated while you are involved in some way with thinking about money, then you might find parts of this book interesting. The subject matter is not very technical, and terms are explained well. The investment ideas, however, are very basic and too generic to be useful for any real-life individual. As Van Tharp, Alexander Elder, and many others have amply demonstrated, investing/trading is highly individualistic, and the key to success in the field is to develop a system that grows out of your own personality and psychology. Investing/trading is an emotional endeavor, and without understanding your own emotions very well, you'll end up losing money. I gave the book three stars largely because of the writing, which was fairly good, but the content was just so-so. If investing/trading is your game, you could do better.

In what seemed like unintended irony, the author in one place is trying to get the reader to understand how difficult (more accurately, impossible) it is to know the precise direction of the market, and he says something to the effect of if you think you know which way the market is headed, then you're saying you are more prescient than Alan Greenspan. The irony is that it wouldn't be hard to be more prescient than Alan Greenspan, who had just about the worst record one could imagine when it came to making market forecasts. So I thought the point of comparison was ill chosen.

At any rate, I was less impressed with the book than I thought I was going to be judging from some of the enthusiastic recommendations other authors had given it. There are more books about investing/trading out there than you could read in a lifetime, many of them very good, and this one is not essential reading. Save yourself the time.
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on March 13, 2014
I enjoy reading "money books" of all sorts and this one does tell you about a lot of the goofy and emotional ways that people get messed up with about money. It was enligntening and entertaining but ultimately the author kept saying the same thing over and over in different ways. This 300 page book could easily have been done in 100 pages or less. Definitely not worth buying brand new. If you have to have it, buy it used as cheaply as possible.
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on May 31, 2014
This book covers some great psychology experiments and how they relate to our innate ability to invest (hint: its not very good). It then provides solutions for hacking our own biological aptitudes and allowing us to understand why we often make irrational decisions. It does lose some steam and meat towards the end, hence 4 stars. I recommend this book for anyone looking to enhance their investing prowess by better understanding their own biological biases.
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on June 13, 2015
This book is a good read for 3 folks :

Those who enjoy reading Daniel Kahneman - Heuristics and Biases school of decision making.

Those who can appreciate Benjamin Graham’s - ‘Margin of safety’ approach in investing

Those who has been dosed with neurophysiology during their college or medical school

In simple terms this is a journalist attempting to shed the light on behind the scenes of our investment decision making process, its pitfalls with citations and what to do about it .

T-H-I-N-K, T-W-I-C-E. ( Appendix 1 pg 266 )

I would rate 4.5 for typo’s , missing figures in the print.
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