How the key for investing successfully is quite simple: prepare, plan and pre-commit to a strategy. Book Review: The Little Book of Behavioral Investing June 14, 2011 James Montier’s addition to the “Little Book” series on investing could have been on practically any topic; however, his focus on investor psychology and his grasp on human irrationality in investing made him the clear candidate for the behavioral portion of the collection. “we don’t need to outsmart everyone else. James Montier’s emphasis is on how to keep behavioral biases from disrupting long-term value investing, not on how to exploit shorter-term emergent market behaviors that may derive from individual human biases. Poor decisions are made in the heat of the moment. A fun read on how our behavior, whether nature or nurture, can work against us when it comes to decision making. Welcome back. Interesting read, but personally, I already knew some of the information here. But I think I’ve found one…. Investor psychology is important and often overlooked. We’d love your help. The Little Book of Investing Like the Pros was written to fill this void. The reasons for such conclusion are as follows. It has many great points about how behavioral bias can lead to bad investment return. Montier reveals the most common psychological barriers, clearly showing how emotion, overconfidence, and a multitude of other behavioral traits, can affect investment decision-making. In his 2010 book entitled The Little Book of Behavioral Investing: How Not to Be Your Own Worst Enemy, author James Montier states: “I…highlight some of the most destructive behavioral biases and common mental mistakes that I’ve seen professional investors make. The book was shorter, narrower and less in-depth than Trading in the Zone....possibly reversing my order of reading would have made this book more valuable to me. This book is definitely in the category of books that take the empirical work of those like Daniel Kahneman, Amos Tversky, David Dunning, and Justin Kruger and interprets it for use within a specific field or context, but it's well written and useful advice. In The Little Book of Behavioral Investing, expert James Montier takes you through some of the most important behavioral challenges faced by investors. The book is short, sweet and has many extremely good messages for any investor - all told in fairly hard-hitting ways. I'd say that this book is interesting and important, but it's degree of appeal is correlated with your interest in finances, simple math and behavioral sciences. I'd strongly recommend it to anyone looking to start investing or examining their current investment strategies. It's all based on the Little Book of Behavioral Investing, written by James Montier. I’ll teach you how to recognize these mental pitfalls while exploring the underlying psychology behind the mistake. Till now, we haven’t known of any such book. The author explains the X-system and the C-system (guts vs brains). Gain access to hundreds of premium investing research articles and CXO's trading strategies, Stock Option Momentum and SeasonalityDecember 9, 2020, Are Currency Carry Trade ETFs Working?December 8, 2020, Stock Market Valuation Ratio TrendsDecember 7, 2020, Weekly Summary of Research Findings: 11/30/20 – 12/4/20December 4, 2020, Rough Net Worth Growth BenchmarksDecember 4, 2020, Persistently High Stock Loan Fee as Return PredictorDecember 3, 2020, Do ETFs Following Gurus/Insiders Work?December 1, 2020, Objective research to aid investing decisions. Review of "The Little Book of Behavioral Investing: ... Summary. In The Little Book of Behavioral Investing, expert James Montier takes you through some of the most important behavioral challenges faced by investors. Very good book in helping you understand your biases and overcoming them through process. The interesting part is that we are predictably irrational. If you like books and love to build cool products, we may be looking for you. Another good entry in the "Little book" series on investing. Then I show you what you can do to try to protect your portfolio from their damaging influence on your returns.” Biases he surveys include: action bias, bias for stories, confirmation bias, conformity bias (herding or groupthink), conservatism (including sunk cost fallacy), disposition effect, empathy gap, endowment effect, hindsight bias, illusion of control, inattentional blindness, information overload, loss aversion, myopia, overconfidence, overoptimism, placebo effect, self-attribution bias and self-serving bias). You can easily. A great book to understand investing from human behavior point of view! Before reading the book, I was under the assumption that, the book will have a great perspective on behavioral investing. How we need to be skeptical, avoid useless predictions, and focus in penetrating analysis. It's written in a light, fun style with quotable quotes and lots of examples. worth thinking about! The Little Book of Behavioral Investing: How not to be your own worst enemy 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. By Chris McKhann "The process is more important than the outcome." Things like "going with the flow", or only reading research that positively agrees with your own decisions. Posted in: Animal Spirits, Fundamental Valuation. This is a very interesting book about human behaviour, biases, how our brains make mistakes and the consequences in investing. The Little Book of Behavioral Investing will take you on a guided tour of the most common behavioral challenges and mental pitfalls that investors encounter and provide you with strategies to … When people experience financial loss, … Offers time-tested ways to identify and avoid the pitfalls … I have been an investor for over 40 years. The tougher aspects of investing are controlling your emotions ( greed, fear) and overcoming your biases. ), This could be regarded as a short summary of behavioral economics. In summary, The Little Book of Behavioral Investing is a broad survey of behavioral biases and countermeasures as related to financial markets, especially for value investors. The book was shorter, narrower and less in-depth than Trading in the Zone....possibly reversing my order of reading would have made this book more valuable to me. It turns when all looks black, but just a subtle shade less black than the day before.”, Burned Out? Montier reveals the most common psychological barriers, clearly showing how emotion, overconfidence, and a multitude of other behavioral traits, can affect investment decision-making. The self-awareness espoused may be as important to successful investing as valuation methods. It is an insightful look into the real, yet most often disregarded dynamics that affect our behavior when we are thrown into the investment arena. …play a game of devil’s advocate…”, “…what can we do to guard against the siren song of stories? In The Little Book of Behavioural Investing, expert James Montier takes you through some of the most important behavioural challenges faced by investors… All Rights Reserved. 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. History of humankind is replete with bad choices by both individuals and nations. One of the interesting examples is that even if a person does well in evaluating a series of one certain kind of math questions, there are other types of questions to which they will be susceptible in choosing the wrong answer. The subject is not only immensely interesting but easy to understand and lends itself to humorous story-telling at the expense of many mighties' follies. Reading this book and applying its principle can save a lot of money. Being a little book it does not have deep discussions on topics of behavioral investment. The efficient market hyposis is based on rational decisions. © 2004-2020 The CXO Advisory Group, LLC. We are often asked about a good book for the layman about behavioural finance – something readable, broad, and with some good real-world applications. A excellent work by the author.Some of the mental pitfall and how to guard yourself against it.Examples are excellent and Although i have not read much book on behavioral economics but i think they all have almost same type of bias with different example. On the other hand, nearly all people who manage their own investments make a myriad of repeated mistakes based on patterned and harmful behavior. Behavioral investing studies these patterns. Having read other books of the "little book" series about investing I'm a bit disappointed about this one. '”, “…stop listening to the so-called experts.”, “All investors should devote themselves to understanding the nature of the business and its intrinsic worth…once you reject forecasting for the waste of time that it is, you will free up your time to concentrate on the things that really matter.”, “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 [it].”, “Turning off the bubblevision is a great step towards preventing yourself from becoming a slave to the market.”, “…we need to learn to look for evidence that would prove our analysis wrong. Bogle’s invention, the index fund, is still one of the safest and stress-free ways of investing today and in this little book he outlines why, and how you can get started with one. How we need to be skeptical, avoid useless predictions, and, This is a very interesting book about human behaviour, biases, how our brains make mistakes and the consequences in investing. “Success in investing doesn’t correlate with IQ once you’re above the level of 100. Like Graham, I have no faith in my ability, or in the ability of most others, to predict the direction of … Using real-world examples and actual Wall Street models used by the pros, we teach you how to pick … Steve LeCompte | Charlie Munger: The Complete Investor. When not reading, writing, or speaking, Montier can usually be found swimming with sharks and blowing bubbles at fishes. In summary, The Little Book of Behavioral Investing is a broad survey of behavioral biases and countermeasures as related to financial markets, especially for value investors. In The Little Book of Behavioral Investing, expert James Montier takes you through some of the most important behavioral challenges faced by investors. On average, we are much more exceptional than we think. Cons. We need to stick to our investment discipline, ignore the actions of others, and stop listening to the so-called experts.” ― James Montier, The Little Book of Behavioral Investing: How not to be your own worst enemy Book Review: James Montier “Little book of Behavioral Investing” Posted On May 30, 2011. Montier reveals the most common psychological barriers, clearly showing how emotion, overconfidence, and a multitude of other behavioral traits, can affect investment decision-making. Avoid a burden of information that only provides confidence but not knowledge. And, that is what this book is about. On top, he is a great thinker and has experience to boot. It reveals our "bad thinking" commonly used by even the best investment fund managers. Book name: The little book of behavioral investing Author: J. Montier ISBN: 978-0-470-68602-7 Pages: 219 Publisher: John Wiley & Sons, Inc. Year of publishing: 2010 Book … Value investing provides the context for discussion. Stream and download audiobooks to your computer, tablet and iOS and Android devices. Behavioral finance, which recognizes that there is a psychological element to all investor decision-making, can help you overcome this obstacle. I enjoyed reading it (kind of Dan Arieli applied to finance). by Wiley. Focusing on process, rather than results, seems to be the only way to avoid being drowned by the inability of our brains to deal with fears, ambiguity or risk aversion, This book is not nearly as good or powerful as Trading in the Zone, but it was worthwhile reinforcement of the earlier lessons. If, like me, you like to do your own investing, then you simply must read this; and re-read it regularly. Highly recommended for everyone who wishes to invest in the markets. It is well explained. For a complete and more thorough run-through, I recommend the fabulous “Thinking, Fast and Slow” by Daniel Kahneman and books by Dan Ariely (“Predictably Irrational” etc.). I only read this because I legitimately had nothing else to read and this was given to me at QWIL in second year from Burgundy. &; Dan Ariely, James B. Duke Professor of Behavioral Economics, Duke University, and author of Predictably Irrational Behavioral finance, which recognizes that there is a psychological element to all investor decision-making, can help you overcome this obstacle. A brilliant author who backs up his statements with cold hard research. We believe the simplicity and accessibility of our stock picking framework is truly unique. Alternative for this book. To get a better understanding of this subject, I decided to read another “Little Book”. And, that is what this book is about. The facts are back up by study. Great examples used to showcase his points and help the reader understand the concepts. In The Little Book of Behavioral Investing, expert James Montier takes you through some of the most important behavioral challenges faced by investors. Let us know what’s wrong with this preview of, Published Must read! It provides a good introduction to the topic and was well researched, quoting numerous studies, and some unpublished work. James Montier is an expert in behavioral finance, argues that investors would have a greater chance of spotting the formation of bubbles if they could only brush up on their history and have a greater awareness of human psychology. James Montier is an expert in behavioral finance, argues that investors would have a greater chance of spotting the formation of bubbles if they could only brush up on their history and have a greater awareness of human psychology. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.”, “be aware that the market does not turn when it sees light at the end of the tunnel. Just think of impulse buying at your... Two – Who’s Afraid of the Big Bad Market? If there is a take-away it might be to make fact based decisions and to slow down (if possible) in that decision making. In The Little Book of Behavioral Investing, expert James Montier, one of the world's foremost behavioral analysts, takes you through some of the most important behavioral challenges faced by investors. James Montier’s examples of “how some of the world’s best investors have striven to develop investment processes that minimize their behavioral errors” are incomplete in a research sense, arguably more story-like than research-like. This book is definitely in the category of books that take the empirical work of those like Daniel Kahneman, Amos Tversky, David Dunning, and Justin Kruger and interprets it for use within a specific field or context, but it's well written and useful advice. Avoid nice stories. This book is not nearly as good or powerful as Trading in the Zone, but it was worthwhile reinforcement of the earlier lessons. These Books Explain Why You Feel That Way. Refresh and try again. History of humankind is replete with bad choices by both individuals and nations. If there is a take-away it might be to make fact based decisions and to slow down (if possible) in that decision making. Though this book is couched in the world of individual investment, it is primarily a catalog of the cognitive biases to which we fall prey in many arenas: politics, personal habits, evaluating truth in a time of over- and dis-information. Montier reveals the most common psychological barriers, clearly showing how emotion, overconfidence, and a multitude of other behavioral traits, can affect investment decision-making. Behavioral economics and cognitive biases go hand in hand. However, that turned out to be a wasted hope. Review: The Little Book of Behavioral Investing One – In the Heat of the Moment Lot of examples of we make the wrong decisions quickly, even if we supposedly know better. Behavioral finance, which recognizes that there is a psychological element to all investor decision-making, can help you overcome this obstacle. You can easily learn to identify them. CXO Advisory. Start by marking “The Little Book of Behavioral Investing: How Not to Be Your Own Worst Enemy” as Want to Read: Error rating book. This simple sentence is the core point of James Montier's "The Little Book of Behavioral Investing. There are no discussion topics on this book yet. Any good book on behavioral investing is valuable. The self-awareness espoused may be as important to successful investing as valuation methods. It has 16 chapters describing the various follies of the investors that most of us are familiar with - Loss Aversion, Overoptimism, Overconfidence, Hindsight Bias, Disposition Effect, Anchoring, Confirmation Bias etc. "It is … Succinct and focuses on process, recommended weekend read for those looking to harness a more disciplined investing approach. Citing a number of studies, he concludes that: “…we should do our investment research when we are in a cold, rational state–and when nothing much is happening in markets–and then pre-commit to following our own analysis and prepared action steps.”, “…fear causes people to ignore bargains when they are available in the market… The ‘battle plan for reinvestment’ is a schedule of pre-commitments…”, “We should get used to asking ‘Must I believe this?’ rather than… ‘Can I believe this? Here are 3 lessons about the power of index funds: Actively managed funds suck, because past profits don’t guarantee future success. One of the interesting examples is that even if a person does well in evaluating. Montier reveals the most common psychological barriers, clearly showing how emotion, overconfidence, and a multitude of other behavioral traits, can affect investment decision-making. It all begins with the most overwhelming fact that Montier is a great writer. In The Little Book of Behavioral Investing, expert James Montier takes you through some of the most important behavioral challenges faced by investors. 2 March 2015. Simple rules, like taking the current market price and back out what it implies for future growth. February 2nd 2010 Don’T the little book of behavioral investing summary future success of human Misjudgment ‘ for long-term investing in the Zone, just! 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