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Blink 3 of 8 - The 5 AM Club
by Robin Sharma
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The Behavioral Investor summary
Discover how your behavior is subconsciously impacting your investments
23 mins
Brief summary
"The Behavioral Investor" by Daniel Crosby explores the psychological aspects of investing and how human behavior can impact investment decisions, often leading to poor outcomes. The book offers insight on how to manage emotions and behavioral biases to make more rational investment choices.
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The Behavioral Investor
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Key idea 1 of 8
To be a successful investor, you must understand how your brain works.
What drives the stock market?
Many people think it’s money. After all, money is at the heart of every portfolio. But far more important than the money people invest are the people who invest that money in the first place. The people are the ones who make the decisions to buy, hold, and sell.
Unfortunately, those decisions are often bad. Why? Because as wonderful as our brains are, they weren’t designed to work in complex, stressful situations. So, if you want to make good financial choices, you need to realize that your brain won’t always lead you in the right direction.
The key message here is: To be a successful investor, you must understand how your brain works.
The human brain was designed to keep our prehistoric ancestors safe. And even though you probably don’t go to work facing mortal danger from saber-toothed tigers in the bush, your brain still acts as if you are.
For example, whenever you’re assessing financial risk, the brain areas responsible for avoiding attack light up. Because your brain thinks you’re being threatened, it limits its focus to these areas to keep you alive. This makes it harder for you to think clearly and makes it more likely that you’ll overlook important information.
Our brains also encourage us to be impatient. They do this by giving us a hit of dopamine – a hormone that makes us feel good – whenever we do something that results in immediate success. Because we like that feeling, we’ll do whatever it takes to get it. Sadly, that means you, as an investor, might sabotage your financial plans because you’re tempted by short-term wins instead of long-term gains.
Intellectually, you might know that it’s not a good idea to chase every opportunity to make a quick buck. But our brains are desperately money-hungry. According to Dr. Brian Knutson of Harvard University, humans are drawn to money without any reference to its actual value. This makes it difficult to resist the promise of reward.
In truth, your brain’s money-lust will always cloud your judgment. But if you’re aware of it, you’ll be better placed to overcome your brain’s impulses and stop yourself before you do the wrong thing.
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What is The Behavioral Investor about?
The Behavioral Investor (2018) explores the subconscious thought patterns and emotions that influence financial investors. Author Daniel Crosby provides insight and guidance that will help you overcome your natural inclinations so that you can make better financial decisions.
The Behavioral Investor Review
The Behavioral Investor (2018) provides valuable insights into the psychology of investing and why we make irrational financial decisions. Here's why this book is worth reading:
- Packed with practical strategies and behavioral tips, it helps readers navigate the complex world of investing and develop a more disciplined approach.
- By exploring behavioral biases and cognitive errors, this book sheds light on the underlying psychological factors that can influence our financial choices.
- With its engaging anecdotes and case studies, it presents complex concepts in an accessible and relatable manner, ensuring the book is never dull or uninteresting.
Best quote from The Behavioral Investor
Our preference for [sameness over change] has profound implications on the quality of both our lives and investment decisions.
—Daniel Crosby
Who should read The Behavioral Investor?
- Financial investors who want to achieve better results
- Aspiring traders developing financial strategies
- Anyone with an interest in psychology
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The Behavioral Investor FAQs
What is the main message of The Behavioral Investor?
The main message of The Behavioral Investor is understanding and managing our biases to make better investment decisions.
How long does it take to read The Behavioral Investor?
The reading time for The Behavioral Investor varies depending on the reader, but it typically takes several hours. However, the Blinkist summary can be read in just 15 minutes.
Is The Behavioral Investor a good book? Is it worth reading?
The Behavioral Investor is worth reading as it provides valuable insights into the psychological factors that influence investment decisions.
Who is the author of The Behavioral Investor?
The author of The Behavioral Investor is Daniel Crosby.
What to read after The Behavioral Investor?
If you're wondering what to read next after The Behavioral Investor, here are some recommendations we suggest:
- The Laws of Wealth by Daniel Crosby
- Big Mistakes by Michael Batnick
- Thinking, Fast and Slow by Daniel Kahneman
- The Algebra of Wealth by Scott Galloway
- Adaptive Markets by Andrew W. Lo
- Powered by Me by Neha Sangwan
- The 5 AM Club by Robin Sharma
- Electra by Sophocles
- Financial Literacy for All by John Hope Bryant
- The Humor Habit by Paul Osincup