Short Book Summaries

Your Money and Your Brain: How the New Science of Neuroeconomics Can Help Make You Rich | Jason Zweig

“We are intuitively poor investors.” Jason Zweig says this in Chapter 1. Zweig leans heavily on the work of Kahneman and Tversky (see below). We are risk-averse and overconfident,  poor decision-makers. We are novelty-seeking and persuaded the majority. We choose possibility over probability and are addicted to anticipation more than the receipt of making money. We are terrible at predicting the future and what will make us happy. We value the present over the future and we often compare ourselves to others. We believe there are patterns where only randomness exists and, to top it off, we think we’re better at others in all of these areas. Knowing our flaws can help us make smarter investment decisions like limiting our individual stock picking —  our “mad” money — to 10% of our portfolio and investing in set-it-and-forget-it mutual funds.

John

P.S. Pair with Stumbling On Happiness by Dan Gilbert and Thinking Fast and Slow by Daniel Kahneman (I’ll post my review soon).

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