A shrink explains difference of Financial certainty v safety

[ls99]

An interview with Harold Evensky, whose client's original training was as a psychologist , wherein he explains how most mortals arrive at financial decisions.

" Kahneman, a psychologist by training, walks readers through the mental cues that help us make up our minds. When it comes to financial decisions, we can often be tricked (or trick ourselves) into believing that we are making the right choice with our money because we often base those decisions on rosy projections, past performance, linked events or even mushy things like emotion and sentiment. But that rarely leads to smart decisions or financial gains when it comes to investments."

BBC - Capital - Can psychology explain our dumb financial decisions?

[gcgang]

Behavioral Economics. Didn't exist when I got my Econ degree, but I wish it was. Very few of us actually behave like the rational person traditional Econ assumes.

[sengsational]

I've read "Thinking Fast and Slow". A good read, if you're into that kind of thing (I am). The public library had the book.

It's amazing how nutty most of us behave ( as exposed by some really creative experiments that these behavioral economists do).

[clifp]

Quote:

Originally Posted by sengsational I've read "Thinking Fast and Slow". A good read, if you're into that kind of thing (I am). The public library had the book. It's amazing how nutty most of us behave ( as exposed by some really creative experiments that these behavioral economists do).

+1 on the book recommendation and my thanks to whomever recommended it on ER.org

[traineeinvestor]

Quote:

Originally Posted by sengsational I've read "Thinking Fast and Slow". A good read, if you're into that kind of thing (I am). The public library had the book. It's amazing how nutty most of us behave ( as exposed by some really creative experiments that these behavioral economists do).

another +1 for Thinking Fast and Slow

A similar (but easier to read) book on the subject is Jason Zweig's Your Money & Your Brain

[Meadbh]

Some years ago I enjoyed reading the first edition of Behavioral Finance and Wealth Management by Michael Pompian (2006). The second edition includes reference to the 2008-2009 crash.

http://www.amazon.ca/Behavioral-Fina.../dp/1118014324

[ERD50]

I also read "Thinking Fast and Slow" recently, though I don't recall seeing it posted here. Maybe, or I just was researching Kahneman, since the 'Freakonomics' guys reference him.

I found lots of the book really fascinating, but overall it was kinda slow for me. I ended up skimming some it, he seemed to just re-state the same things a lot.

I liked the part where he tried to explain to the big-wigs in a financial management company that their incentives to their people based on that year's performance had no long term predictive value. They just smiled. He seemed to think they didn't want to accept this. I think they 'got it', they just needed some good numbers to show clients, and this was one way to get the game moving.

-ERD50