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

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

James Montier
4.4 out of 5 stars  See all reviews (26 customer reviews)

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Product Description

Product Description

A detailed guide to overcoming the most frequently encountered psychological pitfalls of investing

Bias, emotion, and overconfidence are just three of the many behavioral traits that can lead investors to lose money or achieve lower returns. Behavioral finance, which recognizes that there is a psychological element to all investor decision-making, can help you overcome this obstacle.

In The Little Book of Behavioral Investing, expert James Montier takes you through some of the most important behavioral challenges faced by investors. Montier reveals the most common psychological barriers, clearly showing how emotion, overconfidence, and a multitude of other behavioral traits, can affect investment decision-making.

  • Offers time-tested ways to identify and avoid the pitfalls of investor bias
  • Author James Montier is one of the world's foremost behavioral analysts
  • Discusses how to learn from our investment mistakes instead of repeating them
  • Explores the behavioral principles that will allow you to maintain a successful investment portfolio

Written in a straightforward and accessible style, The Little Book of Behavioral Investing will enable you to identify and eliminate behavioral traits that can hinder your investment endeavors and show you how to go about achieving superior returns in the process.

Praise for The Little Book Of Behavioral Investing

"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

From the Inside Flap

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.

Product details

  • Format: Kindle Edition
  • File Size: 389 KB
  • Print Length: 244 pages
  • Page Numbers Source ISBN: 0470686022
  • Publisher: Wiley; 1 edition (30 Mar 2010)
  • Sold by: Amazon Media EU S.à r.l.
  • Language: English
  • ASIN: B003GY0K6Q
  • Text-to-Speech: Enabled
  • X-Ray:
  • Average Customer Review: 4.4 out of 5 stars  See all reviews (26 customer reviews)
  • Amazon Bestsellers Rank: #86,303 Paid in Kindle Store (See Top 100 Paid in Kindle Store)
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Customer Reviews

4.4 out of 5 stars
4.4 out of 5 stars
Most Helpful Customer Reviews
18 of 18 people found the following review helpful
5.0 out of 5 stars The `Little book of Calm' for investors 24 April 2010
Format:Hardcover|Vine Customer Review of Free Product (What's this?)
During the 2000 tech bubble, I invested about 10k on the stock market. Within about 6 months, my investment had risen to 35k. Within another 6 months I had lost almost all of it.

Early in 2010, I thought I would give it another go, not least because I have a considerable amount of cash sitting in a bank account earning nothing.

This time around I promised myself I would learn the basics - how to look at a balance sheet and see if a company will still be around in a year, how to deduce whether a share price is fair value for the underlying company (or an overblown price driven by temporary sentiment).

Although I have a number of books to help me with this, there are two that I refer to often - The Little Book of Value Investing (Little Books. Big Profits), and this book.

The former book helped me see that the best way to profit in share dealing is exactly the same as any other deal making - buy quality items for less than they are worth, and sell when the going rate is worth more than you paid.

The Behavioral investing book is not about the technicalities of share dealing (or even winning strategies), but is more about background, mindset and process.

For example, one thing I realised from reading this book is that it is best to set your buy price AND sell price(s) well before you actually buy a share, and keep a dealing diary that lists why you think the share is worth having. That way, you (a) buy for a well defined reason, and (b) have a well thought out exit strategy for selling (and will not be swayed by later sentiment), and (c) if the reasons for buying the share in the first place ever become compromised, you can see this clearly.
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9 of 9 people found the following review helpful
Format:Hardcover|Vine Customer Review of Free Product (What's this?)
OK, up-front admission - I admit to owning just about every book written by Montier and the odd SocGen report he authored for them. Montier is an eloquent and occasionally sarcastic defender of the faith - i.e. Value Investing. His musings in paid employment were, originally, published as investor notes by Dresdner Kleinwort and Société Générale, and have recently been reissued by Wiley as Value Investing: Tools and Techniques for Intelligent Investment. Out of this paid work came Behavioural Investing: A Practitioners Guide to Applying Behavioural Finance (Wiley Finance), which is undoubtedly one of the reference works on behavioural investing to sit next to other great names such as Shefrin, Lo, Tvede, McKinlay and Thaler. The book under review is a condensed summary of Montier's prior work and highlights the key behavioural fallacies just about everyone is exposed to. That includes me, but also you. And in case you doubt it, Montier has incorporated enough brainteasers in his book to tempt your intuitive reasoning in gaining the upper hand over your rational mind.

Now acknowledge that this battle of minds goes on all the time, especially when you invest your money, reputation and emotions, and you start getting the picture as to why this book might be a good read. Montier makes you aware of some of the key flaws in our reasoning (e.g.
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5 of 5 people found the following review helpful
3.0 out of 5 stars Good info but not rocket science! 19 Mar 2010
By Michael Scott VINE VOICE
Format:Hardcover|Vine Customer Review of Free Product (What's this?)
This book could have been renamed 'Common Sense' and would have basically explained itself better. The book talks you through how your average person invests and that people tend to invest in areas that interest them as opposed to the best areas for making money.

As an example with myself I once invested in Starbucks because I loved their coffee and lost a load of money when there shares dropped, I didn't invest based on good sounds knowledge but rather I like the company.

This book warns you off investing based on your emotions and to invest based on cold hard facts, the reason I have given this three out of five is that all the information in this is pretty obvious! I didn't read this an think 'wow I never thought of that' but it does bring to the front of your mind to be careful when you invest and make sure you are doing it for the right reason.

The book is ok and I can recommend it but it won't blow your mind.
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17 of 19 people found the following review helpful
3.0 out of 5 stars Enjoyable and an easy read,but ... 22 July 2010
By Small Scale VINE VOICE
Format:Hardcover|Vine Customer Review of Free Product (What's this?)
This book is an easy read, with short, pacy chapters full of anecdotal stories and studies. As with all books of this kind of genre, the central themes are pretty straightforward namely:

- financial analysts don't have a better a view of what to invest in than you do; they are simply paid to generate sales (i.e. buys or sells).
- financial commentators use the massive overload of market data that is available to comment on meaninglessly infinitessimal changes in market indices & prices, like it was an unarguable science.
- central bankers and economists were no better than you or me at predicting the crunch, despite this mass of data that is available to them.
- however much you deny it, people's intrinsic behaviour is governed more by pack mentality than you might care to admit (and there are some great examples of this throughout the book !).

So from an investor's standpoint, the author's suggestion is that we select our investments based on a simple set of parameters (such as risk appetite & desired return, investment timeframe, etc) which we should always set in the cold light of day. Once invested, we should then re-evaluate our investments only periodically against these parameters, and buy/sell the investment only when it is no longer satisfying the parameters we had set. In other words, ignore the market mania and mass of "noise" that most market data represents, and follow a simple set of investment principles only. Now then, if only there was a book that outlined how to do that ....
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Most Recent Customer Reviews
5.0 out of 5 stars Montier applies the findings of behavioural psychology to investing.
I thought it was a really useful and interesting introduction to the topic. There's lots of practical stuff here for individual investors to consider. Read more
Published 1 month ago by Pros and Cons
5.0 out of 5 stars A. Rtiscev
A fantastic little book about human errors and perceptions towards investing and financial market. It is a great introductory to Behavioral Finance and Investing. Read more
Published 16 months ago by Artu Rtiscev
5.0 out of 5 stars A must read for every investor!
Montier is big fan of value investing and understanding decision theory when it comes to investing in markets. Read more
Published 21 months ago by gcdlharper
5.0 out of 5 stars A great little book
Great little book on behavioural finance. Summarizes almost everything worth knowing on the topic, and contains a lot of useful anecdotes and stats on the subject. Read more
Published 24 months ago by SEK
4.0 out of 5 stars an easy read...
this book is aneasy read, written in a way that most people should be able to get the messages he is saying... Read more
Published on 13 Sep 2011 by Gcrikey
3.0 out of 5 stars Think with your head, not heart
When I got the book I was expecting it to be pocket size, however, its about 200 pages!

The main message the book sends its to invest in a company you believe in, and... Read more
Published on 20 April 2011 by zenadox
4.0 out of 5 stars Easy and interesting read
I'm not sure why I picked this book, as I'm really bad with money and haven't any to invest.

But should this all change (fingers crossed) I now have a clear, sensible... Read more
Published on 17 Feb 2011 by C. Cousins
5.0 out of 5 stars James Montier's Little Book
James Montier's reputation as the enfant terrible of behavioural finance put me off for a while. I'm glad I gave him a go: his analysis is always reasonable and accessible, rarely... Read more
Published on 17 Feb 2011 by DigiTAL
4.0 out of 5 stars The Truth Hurts
A basic book that covers what we all know and do but are afraid to admit, we all sell low, buy high and let emotions rule our trading decisions. Read more
Published on 9 Dec 2010 by Brian Martin
5.0 out of 5 stars A good introduction
This is a good guide to behavioural investing, written in an accessible style and with enough detail to be both interesting and insightful. Read more
Published on 17 Nov 2010 by DWB1873
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Popular Highlights

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“Those who have knowledge don’t predict. Those who predict don’t have knowledge.” &quote;
Highlighted by 165 Kindle users
It is far better to focus on what really matters, rather than succumbing to the siren call of Wall Street’s many noise peddlers. We would be far better off analyzing the five things we really need to know about an investment, rather than trying to know absolutely everything about everything concerned with the investment. &quote;
Highlighted by 164 Kindle users
Investors should learn to follow the seven P’s—: Perfect planning and preparation prevent piss poor performance. &quote;
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