Think Like the Great Investors: Make Better Decisions and Raise Your Investing to a New LevelPaperback
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- Publisher: John Wiley & Sons Inc
- Format: Paperback | 280 pages
- Dimensions: 160mm x 231mm x 28mm | 431g
- Publication date: 30 September 2013
- Publication City/Country: New York
- ISBN 10: 1118587146
- ISBN 13: 9781118587140
- Illustrations note: black & white illustrations, black & white line drawings, figures
- Sales rank: 488,454
Achieve a new level of investing and trading success by defeating your worst enemy--yourself Successful trading relies on three vital skills: market analysis, money management, and decision-making. The first two are straightforward skills anyone can learn, but the third is much more difficult. Your ability to make the right decisions isn't based on hard facts, but psychological realities like your own temperament, your own biases, and the biases of other traders. In essence, you can only master the stock market when you master yourself first, and that starts with making the right decisions habitually. Think Like the Great Investors is organised into four distinct parts that show you how to understand your own temperament, the psychology of the market as a whole, your own biases and decision-making errors, and how to practically apply your understanding of these factors into your decision-making system. * Written by highly respected investment teacher, speaker, and writer Colin Nicholson * Ideal for both inexperienced traders who want to lower their risk as well as experienced traders who lack that one final piece in the trader's skillset For anyone looking for that final piece of the investing puzzle, the answer is right here. With Think Like the Great Investors, you'll leap beyond the final hurdle to super-successful investing ...yourself.
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COLIN NICHOLSON BEc, SF Fin has been investing his own money in Australian shares for over 45 years and publishes his returns on his website www.bwts.com.au. He has taught both technical analysis and fundamental analysis at a postgraduate level. Students at the Securities Institute of Australia rated him an 'Outstanding Presenter'. Colin has been a highly ranked speaker at Australian Investors Association and Australian Technical Analysts Association conferences as well as being a sought-after speaker to investing associations and at expos nationally. He has written five books on investing, including Building Wealth in the Stock Market, The Psychology of Investing, The Aggressive Investor, Hot Stocks 2007, and Hot Stocks 2008.
Back cover copy
"'To invest successfully over a lifetime does not require a stratospheric IQ, unusual insights, or inside information. What's needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework.'" --Warren Buffett It's no secret that if you want to master the market, your best role models are the most successful investors. They evaluate new information and consistently use their knowledge to make winning decisions about whether to buy, sell, hold or stay out of the market. Their edge is not that they know more than we do. They succeed because they think differently, using decision-making strategies to avoid the natural thought patterns--or cognitive biases--that hold us back in our investing. "Think Like the Great Investors" uncovers the most common cognitive biases that can undermine our investment decisions and provides practical strategies to manage them. It will help you develop a mindset that leads to investing excellence through superior decision making by avoiding potential traps like confirmation bias, mental accounting, sunk cost bias, the natural tendency towards overconfidence, and being carried along by the crowd at turning points in the market. In a clear and simple style, this book shows you how to: recognise your natural cognitive biases, and how they can distort your investment decisions employ proven strategies for overcoming your biases and improving your investment performance develop the art of contrary thinking to avoid being carried away by crowd behaviour at the top of bull markets manage uncertainty with greater confidence. Learn how the great investors think in order to raise your investing to a new level and join the winners' circle. "Think Like the Great Investors" shows you the way.
When we decide to invest our savings we embark on a learning journey that will take many years to complete. First, we need knowledge. We must get our heads around the jargon and understand how the financial markets operate. Most important is that we have a feel for the history of markets in case we learn by repeating the mistakes of those who have gone before us. Next, we must learn how to analyse the economy and financial markets. There are cycles in economic activity that come around at varying time intervals. Unless we understand this, we are likely to find our investments badly damaged and struggle for years to recover to where we were before the last downturn. Then, we should learn how to analyse companies so that we choose good stocks to invest in when their prices are below their value. Above all, we must seek to buy stocks that afford a margin of safety, which will protect our portfolio if things do not go well for a while. An integral part of this is to have strong disciplines around risk management through diversification and position sizing. Most investors think this is enough to be successful, but one thing is missing. All investing requires making decisions in selecting and managing our holdings. It is never just set-and-forget, because markets are always changing. Much of our decision-making skill will be developed through experience, but if it was that simple, we would all be great investors after maybe 10 years or so of active investing. There are very few great investors in the world. They make better decisions than the average investors because they think differently. "Think Like the Great Investors" explains the cognitive biases that the most successful investors seem to avoid. It gives you a range of strategies to manage them and make superior investment decisions. This book will be one of the best investments you ever make.
Table of contents
About the author xi Important note xiii PART I: STRETCHING OUR MIND 1 1 Shaping our destiny 3 2 Men and women (overconfidence) 7 3 I am absolutely certain (overconfidence, confirmation and availability) 13 4 Mine, all mine (mental accounting) 33 5 Why we never learn (reinforcement and punishment) 41 6 Love is blind (cognitive dissonance) 47 7 A little knowledge is dangerous (representativeness) 53 8 It must be tails next (the gambler's fallacy) 59 9 Dangerous rewards (random reinforcement) 69 10 How much is it? (anchoring) 73 11 Reconstruction (hindsight) 81 12 Why we get it wrong (disposition effect and prospect theory) 87 13 We cannot change the past (the sunk cost fallacy) 95 14 I remember it all too well (availability revisited) 101 15 What goes up ... (small numbers, reversion to the mean) 107 16 What is it worth? (overreaction) 113 17 He who hesitates is last (inertia) 119 18 What do you want to do? (regret) 127 19 Ask why not? (confirmation revisited) 135 20 I want it now (impulsiveness, immediate gratification) 141 21 Tell me why (randomness) 147 22 It can't happen (normalcy) 153 PART II: IN THE AVALANCHE 161 23 Mob rule (crowds) 163 24 Notes and commentary on Gustave Le Bon's The Crowd 169 25 Contrary to popular belief ... 187 PART III: CATCHING THE TIDE 193 26 Nine keys 195 27 Failure traits 199 28 Dealing with loss 203 29 Plan to succeed 207 30 Seven investing sins 211 31 The wall 215 32 Capitulation 219 33 Tough going 225 34 Be early 229 35 Blinded by fear 235 36 Conquer fear 239 Further reading 243 Index 247