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The Little Book of Behavioral Investing: How not to be your own worst enemy (Little Books, Big Profits (UK)) by [Montier, James]
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The Little Book of Behavioral Investing: How not to be your own worst enemy (Little Books, Big Profits (UK)) 1st , Kindle Edition

4.3 out of 5 stars 30 customer reviews

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Product Description

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.

From the Back Cover

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


Product details

  • Format: Kindle Edition
  • File Size: 630 KB
  • Print Length: 236 pages
  • Publisher: Wiley; 1 edition (30 Mar. 2010)
  • Sold by: Amazon Media EU S.à r.l.
  • Language: English
  • ISBN-10: 0470686022
  • ISBN-13: 978-0470686027
  • ASIN: B003GY0K6Q
  • Text-to-Speech: Enabled
  • X-Ray:
  • Word Wise: Enabled
  • Enhanced Typesetting: Enabled
  • Average Customer Review: 4.3 out of 5 stars 30 customer reviews
  • Amazon Bestsellers Rank: #267,830 Paid in Kindle Store (See Top 100 Paid in Kindle Store)
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Customer Reviews

4.3 out of 5 stars
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Top Customer Reviews

By ShammyB TOP 500 REVIEWERVINE VOICE on 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.
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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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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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