Behavioral Finance and Your Portfolio: A Navigation Guide for Building Wealth
- Length: 320 pages
- Edition: 1
- Language: English
- Publisher: Wiley
- Publication Date: 2021-05-11
- ISBN-10: 1119801613
- ISBN-13: 9781119801610
- Sales Rank: #1506833 (See Top 100 Books)
Cognitive and emotional biases can wreak havoc with investor portfolios. Poor investment decision making caused by behavioral errors, especially in times of high market volatility, leads to poor financial outcomes – a material problem for both new and experienced investors. Whether you’re mired in loss aversion, suffer from anchoring bias or you’re sorting your portfolio into various mental accounts, investor biases will prevent you from maximizing your wealth. But you can learn to challenge your own biases and prevent costly investment errors!
In Behavioral Finance and Your Portfolio, veteran investor and advisor Michael M. Pompian delivers a thorough grounding in the most important investor biases you’re likely to encounter when making crucial investment decisions. Perhaps the most critical insight, knowing the difference between emotional and cognitive biases, will help you understand what makes you tick as an investor. Full of case studies and quizzes, this book will help you identify and diagnose your own biases. You will become a better investor, even as you deal with the stresses of investing in the real world.
You’ll learn to take control of your decision-making even when challenging markets can push fear or greed to uncomfortable levels. You’ll also discover how to analyze your options, either alone or alongside your investment advisor, as well as how to make better investment decisions overall–and the benefits of backing up those decisions with hard data. .
Relying on his decades of experience in financial markets as both an investor and advisor, Pompian shows you how to understand your unique behavioral investor type, and how to improve decisions based on your individual tendencies. Perfect for individual investors, financial advisors, portfolio managers and other financial professionals, Behavioral Finance and Your Portfolio will earn a place in the library of any conscientious investor hoping to gain perspective on cognitive patterns and biases that may be impairing their ability to achieve the best possible return on their investments.
Cover Title Page Copyright Page Contents Preface Acknowledgments Part One Introduction to Behavioral Finance Chapter 1 What Is Behavioral Finance and Why Does It Matter? Why Behavioral Finance Matters Behavioral Finance: The Big Picture Standard Finance versus Behavioral Finance Chapter 2 Introduction to Behavioral Biases Introduction Behavioral Biases Defined Why Understanding and Identifying Behavioral Biases Is Crucial Categorization of Behavioral Biases Differences between Cognitive and Emotional Biases Difference among Cognitive Biases Emotional Biases A Final Word on Biases Part Two Belief Perseverance Biases Defined and Illustrated Chapter 3 Belief Perseverance Bias 1: Cognitive Dissonance Bias Bias Description Am I Subject to Cognitive Dissonance Bias? Investment Advice Chapter 4 Belief Perseverance Bias 2: Conservatism Bias Bias Description Am I Subject to Conservatism Bias? Investment Advice Chapter 5 Belief Perseverance Bias 3: Confirmation Bias Bias Description Am I Subject to Confirmation Bias? Investment Advice Chapter 6 Belief Perseverance Bias 4: Representativeness Bias Bias Description Examples of Representativeness Bias Am I Subject to Representativeness Bias? Investment Advice Chapter 7 Belief Perseverance Bias 5: Illusion-of-Control Bias Bias Description Example of Illusion of Control Bias Am I Subject to Illusion of Control Bias? Investment Advice Chapter 8 Belief Perseverance Bias 6: Hindsight Bias Bias Description Example of Hindsight Bias Am I Subject to Hindsight Bias? Investment Advice Part Three Information Processing Biases Defined and Illustrated Chapter 9 Information Processing Bias 1: Mental Accounting Bias Bias Description Practical Application Am I Subject to Mental Accounting Bias? Investment Advice Chapter 10 Information Processing Bias 2: Anchoring Bias Bias Description Example of Anchoring and Bias Am I Subject to Anchoring Bias? Investment Advice Bonus Discussion: Investment Strategies That Leverage Anchoring Bias Chapter 11 Information Processing Bias 3: Framing Bias Bias Description Example of Framing Bias Am I Subject to Framing Bias? Investment Advice Chapter 12 Information Processing Bias 4: Availability Bias Bias Description Example of Availability Bias Am I Subject to Availability Bias? Investment Advice Chapter 13 Information Processing Bias 5: Self-Attribution Bias Bias Description Example of Self-Attribution Bias Am I Subject to Self-Attribution Bias? Investment Advice Chapter 14 Information Processing Bias 6: Outcome Bias Bias Description Am I Subject to Recency Bias? Chapter 15 Information Processing Bias 7: Recency Bias Bias Description Example of Recency Bias Am I Subject to Recency Bias? Investment Advice Part Four Emotional Biases Defined and Illustrated Chapter 16 Emotional Bias 1: Loss Aversion Bias Bias Description Example of Loss Aversion Bias Am I Subject to Loss Aversion Bias? Investment Advice Chapter 17 Emotional Bias 2: Overconfidence Bias Bias Description Examples of Overconfidence Bias Am I Subject to Overconfidence Bias? Investment Advice A Final Word on Overconfidence Chapter 18 Emotional Bias 3: Self-Control Bias Bias Description Example of Self-Control Bias Am I Subject to Self-Control Bias? Investment Advice Chapter 19 Emotional Bias 4: Status Quo Bias Bias Description Example of Status Quo Bias Am I Subject to Status Quo Bias? Investment Advice Chapter 20 Emotional Bias 5: Endowment Bias Bias Description Example of Endowment Bias Am I Subject to Endowment Bias? Investment Advice Chapter 21 Emotional Bias 6: Regret Aversion Bias Bias Description Example of Regret Bias Am I Subject to Regret Bias? Advice Chapter 22 Emotional Bias 7: Affinity Bias Bias Description Example of Affinity Bias Am I Subject to Affinity Bias? Investment Advice Part Five Behavioral Investor Types Chapter 23 Staying on Target to Reach Financial Goals Is Hard Non-Financial Examples of Self-Defeating Behavior Financial Examples of Self-Defeating Behavior Chapter 24 Introduction to Behavioral Investor Types Introduction What Is My Behavioral Investor Type? Step 1: BIT Orientation Quiz Step 2: Bias Identification Quiz Step 3: Advice for Each BIT Summary Chapter 25 Preserver Behavioral Investor Type Upside/Downside Analysis Bias Analysis of Preservers Advice for Preservers Chapter 26 Follower Behavioral Investor Type Upside/Downside Analysis Bias Analysis of Followers Other Important Follower Biases: Hindsight, Cognitive Dissonance, and Regret Advice for Followers Chapter 27 Independent Behavioral Investor Type Upside/Downside Analysis Bias Analysis of Independents Self-Attribution Conservatism Bias Representative Bias Advice for Independents Chapter 28 Accumulator Behavioral Investor Type Upside/Downside Analysis Accumulator Bias Analysis Advice for Accumulators Chapter 29 Asset Allocation Case Studies for Each Behavioral Investor Type Part Six Behavioral Aspects of Portfolio Implementation Chapter 30 Behavioral Finance Aspects of the Active versus Passive Debate The Logic of Passive Management The Potential Benefits of Active Management Advice: Use the Best Practical Allocation for Your Portfolio Chapter 31 Behaviorally Aware Portfolio Construction Introduction Goals-Based Investing Consolidating Accounts into a Portfolio View Portfolio Approach Chapter 32 Behavioral Finance and Market Corrections The Most Recent Panic Index EULA
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