The Psychology of Investing: Maybe the Most Important Thing of All

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Over the years, dealing with individual investors of almost every net worth, risk, and age profile, you build quite the mental database of investor psychology from every angle. That's why I feel that the emerging field of behavioral finance as a serious study is almost coming to the rescue of investment advisors who have been surrogate psychologists and coaches on many occasions for their clients and prospects, especially in these fragile economic times. And with the growing availability of good books on the subject, I have personally become almost obsessed with the topic. James Montier's The Little Book of Behavioral Investing should be required reading for finance students as well as market amateurs at large who sincerely want to purge some of the pitfalls and demons that are at work both in the collective nervous system of finance, and our own internal biological system of pain and pleasure seeking. As a matter of fact, it should be required reading for all public company CFO's and their investor relations departments.
And it was with great pleasure that I read Michael Nairne's piece in the Financial Post about the psychological pitfalls of investing. Nairne who runs a family office called Tacita Capital, contributes regularly in the FP and has a good look and feel about how the super wealthy view wealth management, fear, greed, comfort, and one of the most favourite prejudices of all: Confirmatory Bias....or Confirmation bias (yes, we're all guilty of that). Here's his piece.
Next Blog: Tom Burke's PERSONAL RULES of Investing Behavior