In Chapter 21, Larry Harris explains that the commission you pay your broker is only a tiny part of your total cost. For active or large traders, the Implicit Costs are where the real damage happens.
Here’s a question most people never think about. When you walk into a private bank and sit down with an advisor, what exactly is the process? Is there even a process? Or does the advisor just pick investments based on their own favorites and hope for the best?
Chapter 9 is one of those chapters you might be tempted to skip because it sounds theoretical. “Good Markets.” Sounds like an econ textbook subtitle. But Harris actually makes a case here that affects literally everyone, not just traders.
We continue with Chapter 6 of Tim Richards’ Investing Psychology. In Part 1, we covered the early debiasing strategies. Now we get into the harder stuff: why we can’t let go, why we fall in love with stocks, and whether “good enough” is actually good enough.
Chapter 10 of “Behavioral Finance for Private Banking” is where everything from the earlier chapters comes together. All the biases, prospect theory, loss aversion, mental accounting, it all converges here. Into one practical question: how do you figure out how much risk a client can actually handle?
Up to this point in Behavioral Finance and Investor Types, Michael Pompian has been talking about psychology, biases, and investor personalities. Chapter 12 switches gears. Now he lays out what you can actually invest in. Because knowing your own biases is great, but at some point you need to understand the tools on the table.
In Chapter 20, Larry Harris tackles Volatility. Most people see volatility as “risk” or “scary price swings,” but Harris breaks it down into two very different components.
In Part 1 we covered the “normal” reasons people trade: investing, borrowing, exchanging assets, hedging. Those are utilitarian traders who use markets to solve real-world problems. Now we get to the uncomfortable half. Gamblers, speculators, fools, and everyone in between.
Chapter 6 is called “Debiasing.” After five chapters of telling us how broken our brains are, Richards finally starts talking about what we can actually do about it. The short answer: there is no magic fix. But there are tools that help.
You’ve probably heard the standard advice. When you’re young, put your money in stocks. As you get older, shift to bonds. Simple. Clean. Fits on a napkin.