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“Behavioral finance sits at the crossroads of finance, economics, psychology, social psychology, decision-making, science and neurology, to name but a few of the disciplines that make up it’s strange brew.”

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Book:Personal Benchmark: Integrating Behavioral Finance and Investment Management
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“The behavior gap is why the average investor meaningfully underperforms the average returns for asset classes over time. Yet, many can’t resist the temptation of irrational behavior during nerve-racking volatility and irrational exuberance.”

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Book:Personal Benchmark: Integrating Behavioral Finance and Investment Management
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“[You’ll] learn how to improve your investment experience, increase returns formerly sacrificed to misbehavior, and worry less about “The economy” as you become increasingly focused on “My economy.”

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Book:Personal Benchmark: Integrating Behavioral Finance and Investment Management
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“The psychology of individuals – warts and all – must be a central consideration in the formulation of any practical investing approach. The good news here is that others’ misbehavior will consistently and systematically create opportunities for you. The bad news is that you are prone to all of the same quirks and are just as likely, in the absence of strict adherence to the rules, to create the same opportunities for others.”

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Book:The Laws of Wealth: Psychology and the secret to investing success
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“Imagine a world where you could gain more knowledge by reading fewer books, see more of the world by minimizing travel and get more fit by doing less exercise. Certainly, a world where doing less gets you more is highly inconsistent with much of our lived experience, but is just the way Wall Street Bizarro World operates. If we are to learn to live in WSBW (and we must), one of the primary lessons to be learned is to do less than we think we should.”

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Book:The Laws of Wealth: Psychology and the secret to investing success
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“What I am proposing here is that you consistently bet on inconsistency. What I am asking you to do is bet unfailingly on the failures of human reason, which is a sure bet indeed. It is a painful thing to admit that education, intellect and willpower are inadequate to make you the type of investor you would like to be, but it’s not as painful as losing money.”

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Book:The Laws of Wealth: Psychology and the secret to investing success
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“The fact that people are fallible is your biggest enduring advantage in the accumulation of greater wealth. The fact that you are just as fallible is the biggest impediment to that very same goal.”

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Book:The Laws of Wealth: Psychology and the secret to investing success
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“I began this process without preconceptions of how the information would shake out. Five consistent types of behavioral risk emerged: Ego, Emotion, Information, Attention, and Conservation. The number of bad decisions we can make is limitless (have you seen reality TV?), but all behavioral risk has one or more of these five risk factors at its core.”

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Book:The Laws of Wealth: Psychology and the secret to investing success
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“We often analogize our brains to computers – impartial storage apparatus tasked with housing and calling up information objectively. In reality, our brains are far more like beer goggles than supercomputers, which means that the intelligent investor must take precautions to ensure the emotion of the moment is not warping his sense of reality.”

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Book:The Laws of Wealth: Psychology and the secret to investing success
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“[The] more confidence an expert had, the worse his predictions tended to be and that the more famous an expert was, the worse her predictions were on average. Only in Wall Street Bizarro World would we expect confident experts to be stupid and famous thought leaders to be deserving of infamy.”

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Book:The Laws of Wealth: Psychology and the secret to investing success
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“The lessons for behavioral investors are unavoidable: you must automate your process wherever possible and avoid bias in the selection of people and processes. To do otherwise is to believe that professional money managers are actually above the fray of human bias, when the evidence shows us otherwise.”

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Book:The Laws of Wealth: Psychology and the secret to investing success
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“Let me say with all forthrightness that the [Rule-Based Behavioral Investing] model is not perfect and that some years following its principles won’t even beat a passive market cap weighted index. But what it does do is tilt the odds in your favor by consistently exploiting the psychological failings of your opponents in the market.”

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Book:The Laws of Wealth: Psychology and the secret to investing success
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“The behavioral investor understands and seeks to mimic the best parts of passive investing - low turnover, rock bottom fees and appropriate diversification - without succumbing to absentminded buying and selling.”

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Book:The Behavioral Investor: How psychology shapes wealth, risk, and investment decisions
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“This book could have easily been three words long: automate, automate, automate. It likely wouldn't have sold well, and you might have ignored the advice on account of it seeming too simple, but the fact is that many of the thornier elements of emotion can be done away with entirely by slavishly following a system of investment rules in all types of market weather.”

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Book:The Behavioral Investor: How psychology shapes wealth, risk, and investment decisions
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“Being a behavioral investor is less about adhering to some textbook notion of rationality and more about understanding and bending the idiosyncrasies of human nature to our advantage.”

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Book:The Behavioral Investor: How psychology shapes wealth, risk, and investment decisions
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“One of the things that makes adhering to probabilities so difficult (and profitable) for an investor is that emotion has a pronounced impact on how we assess probability. Predictably, positive emotion leads us to overstate the likelihood of positive occurrences and negative emotion does just the opposite. This coloring of probability leads us to misapprehend risk… All too often we confuse the intensity of our longing with the probability of our winning.”

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Book:The Behavioral Investor: How psychology shapes wealth, risk, and investment decisions
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“But the paradox in owning our personal mediocrity is that it makes us, in the strictest sense of the word, exceptional. It is not about believing in yourself - in fact, it’s quite the opposite. It’s about realizing that the less you need to be special, the more special you’ll become… Exceptional investment outcomes are attainable by all of us, if we just stop trying so hard.”

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Book:The Behavioral Investor: How psychology shapes wealth, risk, and investment decisions
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“Far from seamlessly assimilating new ideas into our existing belief framework, research shows that we actually tend to get more firm in our cherished beliefs when those beliefs become challenged.”

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Book:The Behavioral Investor: How psychology shapes wealth, risk, and investment decisions
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“So much of human behavior - political, religious, financial - can be explained by the fact that we want to think the best of ourselves and don’t want to work very hard to do it.”

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Book:The Behavioral Investor: How psychology shapes wealth, risk, and investment decisions
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“Equity markets provide an exception to the heuristic that social coherence trumps logic. You were born to fit in, but investing requires you to stand out. You are wired to protect your ego, but success in markets demand that you subvert it. You are programmed to ask, “Why?”, but must learn to ask, “Why not?”

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Book:The Behavioral Investor: How psychology shapes wealth, risk, and investment decisions
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“We are neither robotically systematic nor wholly idiotic when making investment decisions. To be sure, we do our best to remain objective and make good decisions, but we are strongly influenced by our cognitive limitations and the cloudy lens through which we see the world. But behavioral approaches, which showcased the limitations of our mental computers, simultaneously gave us the notion that what we consumed mattered greatly.”

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Book:Personal Benchmark: Integrating Behavioral Finance and Investment Management
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“If irrational exuberance can bring about financial calamity, then it stands to reason that rational adherence to a set of rules can save our financial lives. It’s not a complex idea, but it’s one that can have profound implications for the personal and financial wellbeing of our families and even our nations. And it all begins with a focus on-you guessed it-ourselves.”

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Book:Personal Benchmark: Integrating Behavioral Finance and Investment Management
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“Pop quiz: What is the best predictor of the size of a retirement nest egg? What’s that you say, performance? Wrong! I’m sorry but the correct answer was “deferral rate,” but thanks for playing. The way that goals-based investing increases deferral rates (and thus, wallet share) is by couching investment in terms of personal meaning… Rather than speaking in sterile terms that rob wealth of its holistic meaning, use your goals as the benchmark and see how much easier saving becomes.”

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Book:Personal Benchmark: Integrating Behavioral Finance and Investment Management
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“There are at least three significant reasons we resist contemplating our personal financial goals: it can be stress-inducing, we dislike numbers, it is socially taboo, and we are slaves to “right now.”

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Book:Personal Benchmark: Integrating Behavioral Finance and Investment Management
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“Despite [the “talking heads” we revere] inability to outperform a dartboard, we continue to look to them and pay them exorbitant salaries. Why? Because they are bold. Surety is baseball, red meat, and the pioneer spirit. Doubt seems wimpy and “Continental.”

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Book:Personal Benchmark: Integrating Behavioral Finance and Investment Management
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“Given the complexity of life, the enormity of the decisions we are called upon to make, and most peoples’ unfamiliarity with financial principles, it is much less a question of whether people will simplify the information they process and recall and more a question of how they will simplify.”

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Book:Personal Benchmark: Integrating Behavioral Finance and Investment Management
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