Hello friend, in today’s article, we see the Behavioral Investor by Daniel Crosby Book summary. If you want to get success in investing then you should the human behavior, to understand human behavior this book helps you. so let’s start this book summary.
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The Behavioural Investor:-Book summary
if you want to be a better Investor, you have to learn how does a human brain work? How do our daily behaviours impact us subconsciously?
Subconsciously means, In a way that is influenced by the part of the mind of which one is not fully aware, like you don’t need a new car, but your mind thinks to buy a new car. so these thoughts are directly linked to our brain.
so its book helps you to become a better investor, let’s start book summary of the book ” the Behavioural Investor: the art and science of Investment Management ”
the author Dr Daniel Crosby is a psychologist, behavioural finance expert. He trains people in companies about customers’ minds. and how to earn an awesome return. (The Behavioral Investor by Daniel Crosby)
So let’s see some awesome strategies to become a better investor.
Strategy 1:- Understanding Your Brain is the Key to Becoming a Successful Investor (The Behavioral Investor)
This means understanding our brain to become a successful investor.
Our brain develops like this, to protect our family, friend, and society, so for this, our ancient people, live in caves, and jungle, there are always fear, of losing lives, to animals, like lion, tiger etc.
Because of fear of death, our brain is always active at that time, and aware of them to stay alert to this situation.
But now we are in a safe zone, we live in a home, far from the jungle, so we are not in a dangerous situation. but our brain works the same as it’s like in past. they don’t even evolve, in understanding the fear of risk, or death.
For example, if we take big decisions, which can affect our family, our brain part, that helps to not take risk they getting active. Because of this, you can’t see clearly so that financial risk is like a cruel animal attack on us.
so this is our brain function, now let’s understand, why people come into the stock market.
Most people come to the stock market to get maximum return, in less time, they want to become rich in a very small time. (The Behavioral Investor by Daniel Crosby)
Whatever they invest in a company the company grow awesomely and gives a good maximum return. but the most important is that more than money are those who want to invest in a company called an investor.
So the market is developed by people so we have to understand human nature to make money in the stock market. So this depends on us, which company, we have to invest and hold for some year then sell it.
But, most of the time when we make a big decision, we can’t get an awesome return. Beause our brain gets confused, they get into stressful situations, when you accept you can’t live the brain on an investment strategy that’s you become a better investment.
Dr Brion Putson is a professor at Haward University He says, ” Humans are drawn to money without any references to its actual value.”
This means people attract money without knowing its value. that’s why we find, out how to get rich fast?
Our brains have impatient behaviour that’s why we don’t look for the long term. that’s why we don’t have to depend on our brains. Because our judgement is not our judgement they depend on previous behaviours and thought patterns.
now, let’s see Strategy 2
Strategy 2:- We humans are not rational in nature But overconfident when we achieve any financial success.
The most famous saying is, ” People invest more in spring compared to Winter.”
So this behaviour is not new behaviour
Our Ancestors use to stock crops in summer, so that they could eat them in winter.
Some researchers find out, Rainy reasons, most investors, do not invest the maximum amount of money because rainy reasons are depression, that is why most investors don’t try to take risks so that’s why they get less return on a cloudy day.
the author says, ” our investment is directly proportional to our feelings, that’s proved, we are not a rational person.”
Rational people are those who take decisions on logic and facts, not on our emotions. If you want to be a successful investor then you have to habit with an uncomfortable feeling, because the market goes up and down.
and in someday, you get lost, as compared to other days, So because of this volatility, our brain creates a strong emotion, so that’s the reason we underestimate ourselves. (The Behavioral Investor by Daniel Crosby)
the author recommends we try to be more rational means, our decision is on facts and logic and create a thought pattern, that does not depend on emotion.
so this tings is difficult but you can do it with regular practice, then with this, the author says, ” Overconfidence is equal to liability.”
In confidence, we are humans living a better life than other animals. we run the business and uncalculated the success we got and in general, our habit is optimistic and we expect a positive return.
so because of this confidence, we get in ego, and say, “I can never fail”
e.g. A new Investor invests in five or six companies that company get a good return, he thinks he is a good investor. and they ignore the market and the success credit gives himself because of this overconfidence, they buy continuously new shares, even when also stock is overvalued.
and they forgot about basic law, which is to buy low and sell high and if they got a small loss. they can’t feel because of this ego.
the author says, ” if you really want to be successful, then you have to forget about Ego at the starting a day.
now let’s see the third strategy
Strategy 3:- Two steps to Invest Successfully like a Behavioural Investor.
Step 1:- Embracing the Unfamiliar
the author says, ” We are investing in those companies that are familiar”
familiar means, you know about the company, because of this tendency, lots of investors, overspend on Domestic stocks. ((The Behavioral Investor by Daniel Crosby)
In U.K. Investors, 805 investors invest in those companies that are familiar or U.K. companies.
10% world’s market value (held by the U.K.) by this also the U.K. Investors missing an international opportunity and their portfolios going at risk.
so to become a Behavioural Investor, you have to accept that, you can’t depend on familiar shares you have to add those companies before you don’t know about the company.
Step 2:- Managing Your emotions
A person has many emotions we have to manage them. emotions are 1) Fear 2) anger 3) joy 4) Sadness
Dr Walt Smith, in the book human emotion, the author says, ” A person has more than 150 + emotional experiences.
The most complicated emotions are those, two emotions that come together at some time. e.g. you are going to your old school, you get sadness and happiness.
Sadness is about, you can’t live again this life, and happiness is about, you had enjoyed, college life and making an awesome friends.
When we make financial decisions, we think our emotion is under control, but actually, that is not the scenario.
What’s going on in your mind, and how you fill, on that most of the thinking depends, on how you make decisions the author says, ” Controlling our emotion is difficult at an impossible.”
Like big companies, Google, Facebook, Goldman Saches, take the meditation program for their employee and because, to perform well in complex tasks. (In the Behavioral Investor by Daniel Crosby)
the author recommends, if you want to be a behavioral investor you have to do meditation. by doing this, you understand the emotions and you can make better decisions.
if you want to be a behavioural investor, you have to understand stock markets are unpredictable and that’s what humans control, not money controls the market.
But our brain is not good as much to take decisions in difficult situations.
let’s summarise this article,
In this book, we learn
- Understanding your brain is the key to becoming a successful investor.
- We humans are not rational in nature, but overconfident when we achieve some financial success.
- Two steps to invest successfully like a behavioural investor:- Step:-1:- Embracing the Unfamiliar Shares Step:-2:- Managing
If you want to learn more about behavioural finance, buy these books from the following link.
so this is all about the book summary of the book ” the Behavioural investor ” by Daniel Crosby
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