Richard Peterson – Inside the Investor’s Brain. The Power of Mind Over Money

Description

Unique insights into how the mind of an investor operates and how developing emotional awareness leads to long-term success Inside the Investor’s Brain provides readers with specific techniques for understanding their financial psychology, so that they can improve their own performance and learn how to outsmart other investors. Chapter by chapter, author Richard Peterson addresses various mental traps and how they play a role in investing. Through examples, such as a gambling experiment with playing cards, the author shows readers how being aware of the subconscious can separate the smart investors from the average ones. This book also contains descriptions of the work of neuroscientists, financial practitioners, and psychologists, offering an expert’s view into the mind of the market. Innovative and accessible, Inside the Investor’s Brain gives investors the tools they need to better understand how emotions and mental biases affect the way they manage money and react to market moves.

Review

“Exceptionally well-written, it will likely prove to be a seminal text on the influence of the human brain on investment behavior. And neurofinance, as that field is known, may provide the next great edge for savvy investors. … Inside the Investor’s Brain , written by an experienced but surprisingly young author (he’s 35), is outstanding. Peterson and his first book have much to offer investors and the institutions in which they work.” — Dr. David L. Nathan, (Barron’s, September 2007)

“Clear and Accessible.” — Bob Frick (Kiplinger’s Personal Finance, December 2007)

“Highly recommended.” — (Kiplinger’s Best Investing Reads of 2007)

“For those who want to take behaviouralism a step further, and to study the science of the brain – a subject that tells us a lot about ourselves, as well as about how we might just make some more money … ” –(Financial Times, December 2007)

From the Inside Flap

The human brain is wired to make decisions in certain ways. Unfortunately, when it comes to the financial markets, the way we’ve been “wired” is not conducive to making money. Nobody knows this better than author Richard Peterson. As a founder of Market Psychology Consulting, a former trader, a developer of psychology-based trading systems, and an investor coach, Peterson understands firsthand how subconscious mistakes (biases) can sabotage the financial decision-making of market participants.

Now, with Inside the Investor’s Brain, Peterson wants to share his invaluable experiences in this field with you. Backed by recent research in neurofinance—the study and application of neuroscience to investment activity—psychology, and experimental finance, this detailed guide explains the fundamental “hardwired” mistakes made by most investors and reveals the simple steps you can take to overcome these obstacles and improve your financial decision-making skills.

After an introduction that illustrates some of the most basic and prevalent investor biases—through the well-documented stories of Long Term Capital Management, Sir Isaac Newton and the South Seas bubble, and Mark Twain and the 1860s silver fever—Inside the Investor’s Brain moves on to:

• Part One: The Intersection of Mind and Money describes basic brain function and how it is unsuited to modern financial market dynamics
• Part Two: Feelings and Finance explains emotional states, their chemical basis, how they alter our financial judgments, and optimal investor personality characteristics
• Part Three: Thinking about Money examines the common thought-traps of investment analysis. Here, misperceptions in the evaluation of financial opportunity and risk are discussed
• Part Four: In Practice offers advice for managing your mind in the financial markets and suggestions on the use of psychology-based investment strategies

Most chapters also contain engaging real-world examples, whose lessons will help you identify subconscious biases; understand when thinking will improve your investment process (and when it won’t); improve your emotional intelligence; and focus on the decision process, not the outcome.

While good investing requires a basic financial education, in order to really excel in this environment, you’ve got to learn how to manage yourself. With Inside the Investor’s Brain as your guide, you’ll quickly discover how becoming familiar with both the terrain of the markets and the topography of your mind can enhance the profitability of your overall investment endeavors.