We’ve spent the last two weeks retelling Tim Richards’ “Investing Psychology” (ISBN: 978-1-118-72219-0). It’s been a bracing, sometimes painful journey through the glitches of the human mind.
We’ve reached the end of the tour. In the final chapter of “Investing Psychology,” Tim Richards pulls back the curtain on the entire investment industry.
We’re nearing the end of Tim Richards’ “Investing Psychology.” In Chapter 8, he tackles the myths that keep us trapped in bad financial habits.
We’ve spent a lot of time dismantling our egos and exposing our biases. Now, in Chapter 7, Tim Richards gives us a toolkit to build something better. He calls it “Good Enough Investing.”
Continuing our look at Chapter 6. We know we need to look at the numbers. Now let’s look at the specific mental exercises that can save your portfolio.
We’ve spent the last five chapters talking about how biased we are. Now it’s time for the “how-to” part. How do we actually fix these mental glitches?
Picking up from Part 1 of Chapter 5. We know the institutions are playing a different game. Now let’s look at the actual humans running the show and why their biology might be messing with your money.
When we have a toothache, we go to a dentist. When we have a legal problem, we call a lawyer. So when we have money to invest, we go to a professional, right?
Picking up from Part 1 of Chapter 4. We know that groups are dangerous. Now let’s look at how the way information is “framed” changes how we spend our money.
Humans are social animals. We evolved to survive in groups, and that means we have a deep-seated need to fit in. But in Chapter 4, Tim Richards explains that while “conforming” kept our ancestors alive, it’s making modern investors broke.
Continuing with Chapter 3 of “Investing Psychology.” We’re looking at all the weird external stuff that influences our money.
Experience actually helps with some biases. Research shows that older investors are less prone to the disposition effect (selling winners and holding losers).
We like to think of ourselves as independent thinkers. The “American Dream” is built on the idea that you can do anything if you just try hard enough. But in Chapter 3, Tim Richards shows us that we’re heavily influenced by the situation we’re in, often without even knowing it.
Picking up from where we left off in Chapter 2. We’ve established that we’re all overconfident. Now let’s look at how that overconfidence turns into specific, expensive mistakes.
We all like to think we’re smart. If we didn’t think we were going to make money, we wouldn’t invest. But here’s a cold splash of water: 93% of American drivers think they’re “above average.” Mathematically, that’s impossible.
Continuing our deep dive into Chapter 1 of Tim Richards’ “Investing Psychology.” Last time, we talked about how our senses lie. Today, we’re looking at why we think we’re in charge when we definitely aren’t.
Wandering around the average investor’s mind is like taking a tour of Wonderland with the White Rabbit. Most of what we think is true is actually false.
I’ve spent over 20 years in IT and a lot of time looking at charts and numbers. One thing I’ve learned is that the math is often the easy part. The hard part is the gray matter between your ears.
So we made it. 9 chapters, 17 posts, one brain that’s a little more aware of its own tricks.
This was “Investing Psychology: The Effects of Behavioral Finance on Investment Choice and Bias” by Tim Richards (ISBN: 978-1-118-72219-0, Wiley 2014). And it was worth every page.
We made it. Chapter 9 is the final content chapter of Tim Richards’ “Investing Psychology.” And it’s not really about new ideas. It’s a wrap-up. A summary. A last attempt to remind you what you should have learned, and why most of us will still ignore it.
Chapter 8 of Investing Psychology is where Tim Richards takes everything from the book and turns it into a myth-busting session. Ten myths. All of them things most people believe. All of them wrong. Or at least, way more complicated than we think.
Previous: Chapter 6 Part 2
After six chapters of bad news about our brains, Chapter 7 finally gives us something we can actually use. Richards calls it “Good Enough Investing.” Not perfect investing. Not beat-the-market-every-year investing. Just good enough.
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 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.
We continue with the second half of Chapter 5 from Tim Richards’ “Investing Psychology.” If Part 1 was about how the professional investing industry takes your money, Part 2 is about how corporations and your own trading habits finish the job.
When we get sick, we go to a doctor. When something breaks, we call a professional. So when it comes to investing, we hand our money to financial experts. Makes sense, right?
In Part 1 we covered how groups and social pressure mess with your investment decisions. Now let’s get into something even sneakier: how language, trust, and social networks warp the way we think about money.
Chapter 4 of Investing Psychology is where Tim Richards talks about something we all deal with but rarely notice: other people messing with our financial decisions. Not on purpose. Just by existing around us.
Previous: Chapter 3 Part 1
We’re still in Chapter 3 of Tim Richards’ “Investing Psychology.” In Part 1, we covered how situations mess with your head. Now let’s talk about something even weirder: your mood, the weather, and why shouting “Fire!” in a theater is basically what happens during a market crash.
Previous: Chapter 2 Part 2
You survived your own ego in Chapter 2. Good job. But here’s the problem. Even if you fix your overconfidence, your environment can still ruin your investing decisions. Chapter 3 of Tim Richards’ book is all about situational finance. The idea that the world around you pushes you into decisions you think are your own.
In Part 1 we talked about overconfidence, loss aversion, and the disposition effect. Now let’s keep going with the rest of Chapter 2. This part gets into emotions, Black Swans, mental accounting, and some practical ideas on how to not sabotage yourself.
Chapter 2 of Tim Richards’ book is called “Self-Image and Self-Worth.” And the title tells you everything. This chapter is about how your ego quietly destroys your investment returns.
This is Part 2 of Chapter 1 from “Investing Psychology” by Tim Richards. If you missed the first part, go read Chapter 1 Part 1 first. We covered how your senses trick you. Now we get into how your brain takes shortcuts and how other people’s behavior messes with your money.
Previous: Intro post
Chapter 1 of Investing Psychology is called “Sensory Finance.” And it starts with a punch to the ego.
I just finished reading “Investing Psychology: The Effects of Behavioral Finance on Investment Choice and Bias” by Tim Richards. And I need to talk about it.