Investing Psychology: The Effects of Behavioral Finance on Investment Choice and Bias + Website

Praise for Investing Psychology All investors are biased. The vast majority of investors are hopelessly biased. The rest could benefit from Tim Richards well–researched book. Therein lies the opportunity for those investors willing to commit to their own personal investing mission statement. Tadas Viskanta, Founder and Editor of the Abnormal Returns blog and author of Abnormal Returns: Winning Strategies from the Frontlines of the Investment Blogosophere 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. Some of the real–world advice in Investing Psychology includes: Assume you are biased and try and recalibrate Dont trade when youre emotional, tired, or hungry Dont compete with institutions Seek to disprove any idea you might have Always track your results Investing Psychology is a unique book that pointedly avoids the popular approach of offering anecdotal support for plausible investment strategies and financial theories. Instead, author Tim Richards teaches 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.

Preface Chapter 1: Sensory Finance Beating the Bias Blind Spot Illusory Pattern Recognition Superstitious Pigeons – and Investors The Super Bowl Effect: If It Looks Too Good To Be True, It Is Your Financial Horoscope: Forecasting and the Barnum Effect Uncertainty: The Unknown Unknowns Illusion of Control Stocks Aren’t Snakes Herding Availability Assuming the Serial Position Hot Hands Financial Memory Syndrome Attention! The Problem with Linda Representation The Seven Key Takeaways Notes Chapter 2: Self–Image and Self Worth The Introspection Illusion Blind Spot Bias, Revisited Rose Colored Investing Past and Present Failures Depressed but Wealthy Disposed to Lose Money Loss Aversion Anchored Two Strangers Hindsight’s Not So Wonderful Deferral to Authority Emotion Black Swans Dirty Money, Mental Accounting A Faint Whisper of Emotion Psychologically Numbed Martha Stewart’s Biases Retrospective Annual Returns Nudged Mindfulness The Seven Key Takeaways Notes Chapter 3: Situational Finance Disposition vs. Situation Beauty is in the Eye of the Investor Angels or Demons? Merely Familiar Lemming Time Story Time Wise Crowds? Adaptive Markets George Soros’ Reflexivity Grow Old Quickly Speaking Ill The Power of Persuasion SAD Investors Sell in May … The Mystery of the Vanishing Anomalies Tweet and Invest Fire! The Rise of the Machines The Seven Key Takeaways Notes Chapter 4: Social Finance Conform – or Die Groupthink Motivated Reasoning Polarized A Personal Mission Statement: Social Identity and Beyond Gaming the System You’ve Been Framed Behavioral Portfolios Dividend Dilemmas The Language of Lucre Embedded Investing Financial Theory of Mind Trust Me, Reciprocally … Akerlof’s Lemons The Peacock’s Tail Facebooked Be Kind To An Old Person The Seven Key Takeaways Notes Chapter 5: Professional Bias Mutual Fund Madness Is Passive Persuasive? Losing to the Dark Side Forecasting – The Butterfly Effect Forecaster Bias Feminine Finance Trading on a High Marriage and Money Muddled Modellers CEO Pay – Because They’re Worth It? Corporate Madness Buyback Brouhaha Oh No, IPO Your 6% Self–Inflicted Trading Tax Expert Opinion? Avoid the Sharpshooters The Seven Key Takeaways Notes Chapter 6: Debiasing Numbers, Numbers, Numbers Losing Momentum Mean Reversion Short Shift Diworsification Disconfirm, Disconfirm Reverse Polarization Expected Value Investing in the Rear View Mirror Living With Uncertainty Sunk By The Titanic Effect Changing Your Mind Love Your Kids, Not Your Stocks Cognitive Repairs Satisficing The Seven Key Takeaways Notes Chapter 7: Good Enough Investing #1: The Rule of Seven #2: Homo sapiens, Tool Maker #3: Meta–Methods #4: Be Skeptical #5: Don’t Trust Yourself #6: Self–Control is Key #7: Get Feedback A Behavioral Investing Framework Step#1: Making it Personal Step #2: Build an Investing Checklist Step #3: Write It Down Step #4: Diarize Reviews Step #5: Get Feedback Step #6: Do Autopsies Step #7: Update Adaptively The Worst Offenders Tools The Mechanics of Investing The Seven Key Takeaways Notes Chapter 8: A Few Myths More Myth 1: Money Makes Us Happy Myth 2: Everyone Can Be A Good Investor Myth 3: Numbers Don’t Matter Myth 4: Financial Education Can Make You A Good Investor Myth 5: I Won’t Panic Myth 6: Debt Doesn’t Matter Myth 7: I Can Get 7% A Year From Markets Myth 8: Inflation Doesn’t Matter Myth 9: Everyone Has Some Good Investing Ideas, Sometime Myth 10: I Don’t Need To Track My Results The Seven Key Takeaways Notes Chapter 9: The Final Round Up Notes About the Companion Website About the Author Index

TIM RICHARDS is the creator of the Psy–Fi Blog (www.psyfitec.com), a unique website dedicated to analyzing, explaining, and integrating the vast body of research on the impact of psychology in finance. As a uniquely focused resource for behavioral investing, the website attracts as many as 25,000 unique visits a month and is regularly featured in the largest information aggregators and websites in the financial industry.