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.
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 audiobook, 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.
Download and start listening now!