You are previewing Investing Psychology: The Effects of Behavioral Finance on Investment Choice and Bias, + Website.
O'Reilly logo
Investing Psychology: The Effects of Behavioral Finance on Investment Choice and Bias, + Website

Book Description

Discover how to remove behavioral bias from your investment decisions

For many financial professionals and individual investors, behavioral bias is the largest single factor behind poor investment decisions. The same instincts that our brains employ to keep us alive all too often work against us in the world of finance and investments.

Investing Psychology + Website explores several different types of behavioral bias, which pulls back the curtain on any illusions you have about yourself and your investing abilities. This practical investment guide explains that conventional financial wisdom is often nothing more than myth, and provides a detailed roadmap for overcoming behavioral bias.

  • Offers an overview of how our brain perceives realities of the financial world at large and how human nature impacts even our most basic financial decisions

  • Explores several different types of behavioral bias, which pulls back the curtain on any illusions you have about yourself and your investing abilities

  • Provides real-world advice, including: Don't compete with institutions, always track your results, and don't trade when you're emotional, tired, or hungry

  • Investing Psychology is a unique book that shows readers how to dig deeper and persistently question everything in the financial world around them, including the incorrect investment decisions that human nature all too often compels us to make.

    Table of Contents

    1. Cover Page
    2. Title Page
    3. Copyright
    4. Dedication
    5. Contents
    6. Preface
    7. CHAPTER 1: Sensory Finance
      1. BEATING THE BIAS BLIND SPOT
      2. ILLUSORY PATTERN RECOGNITION
      3. SUPERSTITIOUS PIGEONS—AND INVESTORS
      4. THE SUPER BOWL EFFECT: IF IT LOOKS TOO GOOD TO BE TRUE, IT IS
      5. YOUR FINANCIAL HOROSCOPE: FORECASTING AND THE BARNUM EFFECT
      6. UNCERTAINTY: THE UNKNOWN UNKNOWNS
      7. ILLUSION OF CONTROL
      8. STOCKS AREN'T SNAKES
      9. HERDING
      10. AVAILABILITY
      11. ASSUMING THE SERIAL POSITION
      12. HOT HANDS
      13. FINANCIAL MEMORY SYNDROME
      14. ATTENTION!
      15. THE PROBLEM WITH LINDA
      16. REPRESENTATION
      17. THE SEVEN KEY TAKEAWAYS
      18. NOTES
    8. CHAPTER 2: Self-Image and Self-Worth
      1. THE INTROSPECTION ILLUSION
      2. BLIND SPOT BIAS, REVISITED
      3. ROSE-COLORED INVESTING
      4. PAST AND PRESENT FAILURES
      5. DEPRESSED BUT WEALTHY
      6. DISPOSED TO LOSE MONEY
      7. LOSS AVERSION
      8. ANCHORED
      9. TWO STRANGERS
      10. HINDSIGHT'S NOT SO WONDERFUL
      11. DEFERRAL TO AUTHORITY
      12. EMOTION
      13. BLACK SWANS
      14. DIRTY MONEY, MENTAL ACCOUNTING
      15. A FAINT WHISPER OF EMOTION
      16. PSYCHOLOGICALLY NUMBED
      17. MARTHA STEWART'S BIASES
      18. RETROSPECTIVE
      19. ANNUAL RETURNS
      20. NUDGED
      21. MINDFULNESS
      22. THE SEVEN KEY TAKEAWAYS
      23. NOTES
    9. CHAPTER 3: Situational Finance
      1. DISPOSITION VS. SITUATION
      2. BEAUTY IS IN THE EYE OF THE INVESTOR
      3. ANGELS OR DEMONS?
      4. MERELY FAMILIAR
      5. LEMMING TIME
      6. STORY TIME
      7. WISE CROWDS?
      8. ADAPTIVE MARKETS
      9. GEORGE SOROS' REFLEXIVITY
      10. GROW OLD QUICKLY
      11. SPEAKING ILL
      12. THE POWER OF PERSUASION
      13. SAD INVESTORS
      14. SELL IN MAY …
      15. THE MYSTERY OF THE VANISHING ANOMALIES
      16. TWEET AND INVEST
      17. FIRE!
      18. THE RISE OF THE MACHINES
      19. THE SEVEN KEY TAKEAWAYS
      20. NOTES
    10. CHAPTER 4: Social Finance
      1. CONFORM—OR DIE
      2. GROUPTHINK
      3. MOTIVATED REASONING
      4. POLARIZED
      5. A PERSONAL MISSION STATEMENT: SOCIAL IDENTITY AND BEYOND
      6. GAMING THE SYSTEM
      7. YOU'VE BEEN FRAMED
      8. BEHAVIORAL PORTFOLIOS
      9. DIVIDEND DILEMMAS
      10. THE LANGUAGE OF LUCRE
      11. EMBEDDED INVESTING
      12. FINANCIAL THEORY OF MIND
      13. TRUST ME, RECIPROCALLY …
      14. AKERLOF'S LEMONS
      15. THE PEACOCK'S TAIL
      16. FACEBOOKED
      17. BE KIND TO AN OLD PERSON
      18. THE SEVEN KEY TAKEAWAYS
      19. NOTES
    11. CHAPTER 5: Professional Bias
      1. MUTUAL FUND MADNESS
      2. IS PASSIVE PERSUASIVE?
      3. LOSING TO THE DARK SIDE
      4. FORECASTING—THE BUTTERFLY EFFECT
      5. FORECASTER BIAS
      6. FEMININE FINANCE
      7. TRADING ON A HIGH
      8. MARRIAGE AND MONEY
      9. MUDDLED MODELLERS
      10. CEO PAY—BECAUSE THEY'RE WORTH IT?
      11. CORPORATE MADNESS
      12. BUYBACK BROUHAHA
      13. OH NO, IPO
      14. YOUR 6 PERCENT SELF-INFLICTED TRADING TAX
      15. EXPERT OPINION?
      16. AVOID THE SHARPSHOOTERS
      17. THE SEVEN KEY TAKEAWAYS
      18. NOTES
    12. CHAPTER 6: Debiasing
      1. NUMBERS, NUMBERS, NUMBERS
      2. LOSING MOMENTUM
      3. MEAN REVERSION
      4. SHORT SHIFT
      5. DIWORSIFICATION
      6. DISCONFIRM, DISCONFIRM
      7. REVERSE POLARIZATION
      8. EXPECTED VALUE
      9. INVESTING IN THE REAR VIEW MIRROR
      10. LIVING WITH UNCERTAINTY
      11. SUNK BY THE TITANIC EFFECT
      12. CHANGING YOUR MIND
      13. LOVE YOUR KIDS, NOT YOUR STOCKS
      14. COGNITIVE REPAIRS
      15. SATISFICING
      16. THE SEVEN KEY TAKEAWAYS
      17. NOTES
    13. CHAPTER 7: Good Enough Investing
      1. #1: THE RULE OF SEVEN
      2. #2: HOMO SAPIENS, TOOL MAKER
      3. #3: META-METHODS
      4. #4: BE SKEPTICAL
      5. #5: DON'T TRUST YOURSELF
      6. #6: SELF-CONTROL IS KEY
      7. #7: GET FEEDBACK
      8. A BEHAVIORAL INVESTING FRAMEWORK
      9. STEP #1: MAKING IT PERSONAL
      10. STEP #2: BUILD AN INVESTING CHECKLIST
      11. STEP #3: WRITE IT DOWN
      12. STEP #4: DIARIZE REVIEWS
      13. STEP #5: GET FEEDBACK
      14. STEP #6: DO AUTOPSIES
      15. STEP #7: UPDATE ADAPTIVELY
      16. THE WORST OFFENDERS
      17. TOOLS
      18. THE MECHANICS OF INVESTING
      19. THE SEVEN KEY TAKEAWAYS
      20. NOTES
    14. CHAPTER 8: A Few Myths More
      1. MYTH 1: MONEY MAKES US HAPPY
      2. MYTH 2: EVERYONE CAN BE A GOOD INVESTOR
      3. MYTH 3: NUMBERS DON'T MATTER
      4. MYTH 4: FINANCIAL EDUCATION CAN MAKE YOU A GOOD INVESTOR
      5. MYTH 5: I WON'T PANIC
      6. MYTH 6: DEBT DOESN'T MATTER
      7. MYTH 7: I CAN GET 7 PERCENT A YEAR FROM MARKETS
      8. MYTH 8: INFLATION DOESN'T MATTER
      9. MYTH 9: EVERYONE HAS SOME GOOD INVESTING IDEAS, SOMETIME
      10. MYTH 10: I DON'T NEED TO TRACK MY RESULTS
      11. THE SEVEN KEY TAKEAWAYS
      12. NOTES
    15. CHAPTER 9: The Final Roundup
      1. NOTES
    16. About the Companion Website
    17. About the Author