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19 of 19 people found the following review helpful
5.0 out of 5 stars The `Little book of Calm' for investors
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...
Published on 24 April 2010 by M. Bhangal

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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!
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...
Published on 19 Mar 2010 by Michael Scott


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19 of 19 people found the following review helpful
5.0 out of 5 stars The `Little book of Calm' for investors, 24 April 2010
By 
M. Bhangal "S" (Somewhere in Northern England) - See all my reviews
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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.

The Behavioral investing book is full of such gems... from showing that most stockbrokers are not interested in making money on your investment (they simply want to keep their job, which is not the same thing!), that most professional forecasts for any time-frame longer than a year are historically no better than guessing, and - most importantly - that your worst enemy is in share dealing is usually yourself.

Behavioral Investing is a book I look at whenever the market is going against my position. It shows that panic selling or buying for a quick buck is not the way forward... instead, I should keep calm and look only to my original reasons for buying and my predefined exit strategy. If that strategy was right when I bought the share, it must be right now, so why follow sentiment?

In short, this book is my `Little book of calm' for investing. It helps me to stick to process and ignore the mob. My only wish is that I had the same strategy (and such useful reading material) back in 2000...
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9 of 9 people found the following review helpful
5.0 out of 5 stars A concise introduction to flawed thinking by investment managers, 5 April 2010
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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. overoptimism, overconfidence, following authority, inability to distinguish noise from information, confirmatory bias, inherent conservatism, narrative fallacy, predictable surprises) or, in some cases, the complete absence of any reasoning whatsoever (e.g. groupthink). He posits some simple measures to help us become better investors such as avoiding procrastination, keeping a trading diary, reading his book regularly (actually, he doesn't say that but it he doesn't have to by the time you finished reading it), designing and documenting an investment process to help you stick to it (pre-commitment), reverse valuation analyses (backcasting DCF assumptions), the use of checklists, and the practice of a good measure of introspection.

There are some little nuggets of wisdom (often sourced from other investment gurus) in this book that Montier does not elaborate on, but that may warrant further investigation for those with an interest in finding where Montier got his mustard from, e.g. Seth Klarman, Sir John Templeton, David Einhorn, David Kahneman, Irving Janis and Michael Steinhardt. All in all, The Little Book of Behavioral Investing: How Not to be Your Own Worst Enemy (Little Book, Big Profits) is a great summary of the essence of behavioural science applied to the investment process. It serves as a good introduction to the matter, or as a quick reminder for those in practice needing to re-mind themselves about the flaws of our mind. It is as unreservedly recommended for your education as it was for mine.

James Montier's "Little Book of Behavioral Investing" is the 10th in the "Little Book Big Profits" series of investment titles. It publishes in a condensed fashion the main themes of prior work from some big names in the money management industry like Malkiel (Random Walk), Browne (Value Investing) and, now, Montier. I've read some of the other works and found this a good series. As to Montier himself, he's an asset allocation manager at GMO, a Boston based asset manager co-founded by Jeremy Grantham and Eyk Van Otterloo who practice value based investing as propounded by Benjamin Graham. I wonder how his funds perform...
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3 of 3 people found the following review helpful
4.0 out of 5 stars Definitely worth reading, not just for professional investors, 20 April 2010
By 
J. S. Hardman "Consultant software developer ... (Near London, UK) - See all my reviews
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Just to be clear - "The Little Book of Behavioural Investing" is not that little in terms of page count, coming in at 217 pages, so you probably won't read it in one sitting. It is, however, little in the sense that it will fit in a large jacket pocket.

This book contains a series of reminders of things that many people instinctively do when investing, that may not necessarily be the best things to do. It also contains some things that people can do to overcome those instincts. For example, keeping notes of why you bought something in the first place, and pre-committing to the conditions under which you will sell. Certainly, the description of the apathy that people get when they have bought a stock and the question "if I didn't already have it would I buy it today", spurred me into selling one stock that I had held for a while. None of this is rocket science, and this book is far more readable than many books on investment, avoiding the use of too much jargon, technical detail etc.

So, a potentially useful reminder of traps that people fall into. It did feel a little over-wordy and repetitive, and a couple of language errors slipped by the proof readers, but the content is definitely useful, even if there are people who would disagree with some specific comments in it. If just one thing in the book helps improve your decision making process then the book will have paid for itself.

There have been a number of books over the last few years on the subject of judgement and decision making, some academic, some aimed at the mainstream market. This one is kind of in the middle ground, neither academic nor populist, but aimed at people who invest, either for themselves or managing other people's money. It is not a beginner's guide to investing, so you should have some knowledge and ideally experience to get the most from this book. Whether you work in the industry, you manage your own SIPP, or you just buy the odd share, this is definitely worth a read.
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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 "www.nowillpowerrequired.co.uk" (Norfolk, UK) - See all my reviews
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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 "small_scale" (London UK) - See all my reviews
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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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1 of 1 people found the following review helpful
4.0 out of 5 stars The Little Book of Behavioral Investing, 11 April 2010
By 
Spider Monkey (UK) - See all my reviews
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`The Little Book of Behavioral Investing' looks at behavioural (UK Spelling rather than the US spelling for the book title) 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.

Feel free to check out my blog which can be found on my profile page.
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2 of 2 people found the following review helpful
3.0 out of 5 stars Think with your head, not heart, 20 April 2011
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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 not just because the share price comes down. There are "common sense" elements in the book which, so it more a reminder that the stock market is ultimately a gamble and the risk of loosing is very real.

The books tries to apply structure to making investment decisions in advance. For example doing your research of the company, future growth prospects, why profits might increase, and costs decrease. Also, gives guidance on holding a balanced portfolio of investments, i.e. no all eggs in one basket industry.

With shares, emotions can run high, when prices go higher or lower than expected, so its good to have an exit strategy in advance and plan for those situations.

Overall the the book was a little repetitive at times, but the content is definitely useful.
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2 of 2 people found the following review helpful
5.0 out of 5 stars James Montier's Little Book, 17 Feb 2011
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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 divisive for the sake of it; he does a great job of summarising academic research; and he regularly quotes investing greats such as John Maynard Keynes and Benjamin Graham as well as modern day gurus.

It's a great shame that the classical and behavioural finance schools don't have a more open dialogue. Classical finance should be a "normative" theory -- how things would be in a perfect world. Behavioural finance is a "positive" theory -- how things actually work in the messiness of reality with imperfect decision-makers. By investigating and ironing out flaws in the real-world we can slowly move things closer to the classical idyll. This can be through arbitraging stock market anomalies (e.g. the size and value effects), or by helping investors to avoid common errors (Richard Thaler and Cass Sunstein - Nudge). The trouble started when early empirical tests failed to reject the classical models, and theorists with a bias for rational models starting seeing them as accurate descriptions of reality (Justin Fox - The Myth of the Rational Market).

Like any new field, behavioural finance is rapidly developing. This book therefore benefits from its recent release date, and Montier summarises some of the most interesting developments (such as the technique of fMRI brain scanning), as well as all the classic findings such as overconfidence and loss aversion. Overall, I think this is the best non-technical introduction to behavioural finance out there.

This book is an easygoing quick read, and would benefit anyone who needs to make decisions for a living, as well as individual and professional investors.
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1 of 1 people found the following review helpful
4.0 out of 5 stars The Truth Hurts, 9 Dec 2010
By 
Brian Martin "lucky laddie" (Erskine Scotland) - See all my reviews
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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.

This book explains why we do such things and tries to point us in the right direction so we do not make the same mistakes. Time will tell if I have the bottle.
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1 of 1 people found the following review helpful
4.0 out of 5 stars Punchy and to the point, 23 Sep 2010
By 
Glen Allan (Renfrewshire, Scotland) - See all my reviews
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This book helps break down the physchological investing principles into manageable bite sized chapters.

Plenty of examples to whet your appetite, but to get a more detailed perspective you are better reading some more specific books regarding certain principles outlined in this volume.

The first couple of chapters are set aside to get the reader to convert to the investing principles, this is done by helping to tear up some of the myths and phsychological barriers to dispassionate investing. Wall Street myths, is the Broker your friend? ...etc.

Basically the evidence provided helps support the argument that you should stick to a system run by yourself.

The rest of the book is based on the way to quickly develop the required strategy for retaining and selling/managing your portfolio - after all how many times do you buy/sell for the wrong reasons and didn't even know it?

All in all a useful appetizer to another perspective on investing, and every little bit of knowledge helps.

Pacily written and broken down into manageable sections so as not to bore you.

Worth a read.
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