Author: Michael M. Pompian
Publisher: Wiley; 2 edition (January 3, 2012)
Average Rating: 3.5 star
This book is a guide on how one can apply behavioral finance information to their personal wealth management in their practical life. This book by Michael M. Pompian is among very few books that have addressed the subjects of behavioral finance, cognitive biases, and neuroeconomics aptly. Previous books on behavioral finance have anticipated strategies from security mispricing because of irrationality, but this author focuses on advising bias-prone clients who are a threat to their own financial success.
Furthermore, this book offers implementable methods for creating behaviorally modified investment portfolios, which may be beneficial for the investors to reach their future financial goals. This updated edition has modified case studies to show investors and financial advisors how an investor’s behavior can be altered to improve investment decision-making.
Two experiments took place to monitor the investor’s behavior. In the first one, it showed that investments are based on what you receive and there is an opportunity cost to it. The second experiment was on basketball bidders in which the bid almost doubled because of credit facility. This explains the phenomena of mental accounting. This book is a well-structured road map for investors. This book is a collection of 20 most reputable investor biases into “behaviorally-modified” asset allocation decisions.