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Investing and the Irrational Mind: Rethink Risk, Outwit Optimism, and Seize Opportunities Others Miss
Make RATIONAL decisions in the IRRATIONAL world of investing
Readers will find within these pages new truths that will help transform their thinking. This is more relevant than the latest strategies, trading systems, or technical chart formations.
--William J. Brodsky, Chairman and CEO, Chicago Board Options Exchange
Koppel offers pioneering insights, backed by substantial research, that help explain how psychology influences financial decisions and drives markets. Investing and the Irrational Mind is a must-read for both the professional and nonprofessional investor.
--Robin Mesch, President, Mesch Capital Management
If there is truth to the Yiddish proverb that 'man plans and God laughs, ' read Investing and the Irrational Mind to gain an essential understanding of what to do with your stocks and bonds when God is cracking up. As the sages advised, 'All the rest is commentary.'
--Yra Harris, CME Group member, President of Praxis Trading, and author of the daily investment blog Notes from the Underground
Investing and the Irrational Mind explains the psychological barriers to making good investment decisions--and more importantly how to overcome them. Koppel shows the dangers of our own habit-driven behavior, biases, and heuristics and how they lead us to violate our own investment axioms.
--Alexander Abell, Director, BlackRock, Inc.
Investing is fraught with uncertainty, which gives rise to psychological issues that investors ignore at their peril. Bob Koppel has written a fascinating, entertaining, and comprehensive examination of this multifaceted area of inquiry. If you invest for a living, or even if you're just a student of the psychology of self, you will find beneficial insights in the pages of this book.
--A. Thomas Shanks, President and CEO, Hawksbill Capital Management
About the Book
Most investors are driven by greed and panicked by fear, which is why so many lose so much during market upheavals. It's also why so few gain so much. What separates the winners from the losers? People who remain calm, focused, and analytical during market ups and downs always come out on top--and snatch the losses of those who panic.
Investing and the Irrational Mind gives you the tools for overcoming the self-destructive impulses that stand between you and profit. Behavioral finance expert Robert Koppel reveals why your brain sends certain negative messages during the investing process. Applying the latest advances in neuroeconomics and insights from top traders, he provides a program for building the habits used by the world's most successful investors.
Investing and the Irrational Mind teaches you how to:
Identify negative, self-defeating patterns of thought
Tailor your goals according to your particular investing psychology
Develop a framework for overcoming irrational thoughts in investment decisions
Use one of your most powerful investing tools--intuition
The investing world operates by the law of the jungle, with a new surprise lurking around every corner. How often have you abandoned a perfectly sound investing strategy because you panicked? Success requires focused concentration that permits an unbiased perception of the market, writes Koppel. All we can ever control is ourselves, but that is more than enough.
Armed with 30 years of experience as an analyst and fund manager, Koppel helps you develop a focused, disciplined, confident, and profitable approach to investing using the best tool at your disposal: your brain. Filled with surprising insights into human behavior and rock-solid financial advice, Investing and the Irrational Mind helps you draw consistent profits in an inconsistent investing world.
Readers will find within these pages new truths that will help transform their thinking. This is more relevant than the latest strategies, trading systems, or technical chart formations.
--William J. Brodsky, Chairman and CEO, Chicago Board Options Exchange
Koppel offers pioneering insights, backed by substantial research, that help explain how psychology influences financial decisions and drives markets. Investing and the Irrational Mind is a must-read for both the professional and nonprofessional investor.
--Robin Mesch, President, Mesch Capital Management
If there is truth to the Yiddish proverb that 'man plans and God laughs, ' read Investing and the Irrational Mind to gain an essential understanding of what to do with your stocks and bonds when God is cracking up. As the sages advised, 'All the rest is commentary.'
--Yra Harris, CME Group member, President of Praxis Trading, and author of the daily investment blog Notes from the Underground
Investing and the Irrational Mind explains the psychological barriers to making good investment decisions--and more importantly how to overcome them. Koppel shows the dangers of our own habit-driven behavior, biases, and heuristics and how they lead us to violate our own investment axioms.
--Alexander Abell, Director, BlackRock, Inc.
Investing is fraught with uncertainty, which gives rise to psychological issues that investors ignore at their peril. Bob Koppel has written a fascinating, entertaining, and comprehensive examination of this multifaceted area of inquiry. If you invest for a living, or even if you're just a student of the psychology of self, you will find beneficial insights in the pages of this book.
--A. Thomas Shanks, President and CEO, Hawksbill Capital Management
About the Book
Most investors are driven by greed and panicked by fear, which is why so many lose so much during market upheavals. It's also why so few gain so much. What separates the winners from the losers? People who remain calm, focused, and analytical during market ups and downs always come out on top--and snatch the losses of those who panic.
Investing and the Irrational Mind gives you the tools for overcoming the self-destructive impulses that stand between you and profit. Behavioral finance expert Robert Koppel reveals why your brain sends certain negative messages during the investing process. Applying the latest advances in neuroeconomics and insights from top traders, he provides a program for building the habits used by the world's most successful investors.
Investing and the Irrational Mind teaches you how to:
Identify negative, self-defeating patterns of thought
Tailor your goals according to your particular investing psychology
Develop a framework for overcoming irrational thoughts in investment decisions
Use one of your most powerful investing tools--intuition
The investing world operates by the law of the jungle, with a new surprise lurking around every corner. How often have you abandoned a perfectly sound investing strategy because you panicked? Success requires focused concentration that permits an unbiased perception of the market, writes Koppel. All we can ever control is ourselves, but that is more than enough.
Armed with 30 years of experience as an analyst and fund manager, Koppel helps you develop a focused, disciplined, confident, and profitable approach to investing using the best tool at your disposal: your brain. Filled with surprising insights into human behavior and rock-solid financial advice, Investing and the Irrational Mind helps you draw consistent profits in an inconsistent investing world.
- GenresFinanceNonfiction
319 pages, Hardcover
First published March 18, 2011
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Displaying 1 - 3 of 3 reviews
June 28, 2016
There's some nice insights in this book but it does get repetitive and it spends way too much time quoting other people's works and even quotes his own work several times which was just unneeded. The most interesting part was that study that showed that making money releases the same endorphins in your brain as falling in love does.
August 23, 2018
A system with a proven edge and good money management practices are necessary but not sufficient for someone to succeed in trading. The decisive factor is the trader’s psychological fortitude. Robert Koppel is a former commodities trader and hedge fund partner who has written several books on trading psychology. In this book he uses academic research within behavioural finance and neurofinance to back up his previously experience based conclusions.
The purpose of the book is to help the reader to break free from the psychological mechanisms that reinforce various investing fallacies. “The solution begins with awareness, leading to cognitive and emotional strategies that reinterpret our market experience through language, belief, feelings, meaning, and action.” In my meaning Koppel does a great job with the first step – awareness – but gives the reader too little guidance on how to establish “bias resistant” strategies and processes. Awareness of psychological biases is not enough as it is very hard to imagine away reflexive mental processes. Knowing yourself does not guarantee that you can take that second step by yourself. The book is rescued by the depth and breadth of the author’s knowledge when it comes to the subjects he’s presenting.
The two most interesting and novel topics to me were the research presented when it comes to intuition and to what’s called Theory of Mind. I’ve often found traders public opinions on intuition a bit too romanticized – seriously, how often do we want to read about George Soro’s back aches? Intuition, as the author presents it, is a sort of pattern matching process that enables an investor to quickly reach a course of action. Intuition is facilitated by mental models built by knowledge and long experience. The more complex and unclear a situation is the more valuable is intuition. Interestingly the solutions have sometimes been found to be triggered by physical cues (back aches…). This presents a dilemma; our mind shows limited rationality and we are subject to lots of psychological fallacies and yet when we ignore the intuition of the seasoned investment professional, performance is shown to go down. How does one build a process that protects against biases, keeps a rational analysis in various situations and which also allows intuition to tip the scales? Koppel proposes that intuition is used to generate investment ideas and that research is used as a second step. The order probably depends on what investment style the investor uses in general.
Theory of Mind (ToM) is the ability to recognize and understand the emotions and state of mind of other investors. With the ability comes the chance of predicting the action of other investors. This ability depends on both a strong awareness of oneself and of the market. ToM connects nicely to Andrew Lo’s adaptive market theory. In a market of constant adaptive change the investor who can read the emotions of others has a distinct advantage. Koppel also presents research that finds a positive correlation between a highly developed ability to read other’s state of mind and trading results. “Trading is essentially a social activity” as one of the researchers puts it.
This is a book that lacks a sense of direction. Just as a trader needs a system a book needs a structure. The chapters that are stacked on one another are mostly listings of various erroneous behaviors and it feels like the author's joy in having found scientific backing to his past experiences has prevented him from focusing on what he wants to put forth. The text is too much a random selection of facts about behavioral finance mixed with a dose of trading smartness. Luckily, the facts are interesting and Koppel is well read.
The purpose of the book is to help the reader to break free from the psychological mechanisms that reinforce various investing fallacies. “The solution begins with awareness, leading to cognitive and emotional strategies that reinterpret our market experience through language, belief, feelings, meaning, and action.” In my meaning Koppel does a great job with the first step – awareness – but gives the reader too little guidance on how to establish “bias resistant” strategies and processes. Awareness of psychological biases is not enough as it is very hard to imagine away reflexive mental processes. Knowing yourself does not guarantee that you can take that second step by yourself. The book is rescued by the depth and breadth of the author’s knowledge when it comes to the subjects he’s presenting.
The two most interesting and novel topics to me were the research presented when it comes to intuition and to what’s called Theory of Mind. I’ve often found traders public opinions on intuition a bit too romanticized – seriously, how often do we want to read about George Soro’s back aches? Intuition, as the author presents it, is a sort of pattern matching process that enables an investor to quickly reach a course of action. Intuition is facilitated by mental models built by knowledge and long experience. The more complex and unclear a situation is the more valuable is intuition. Interestingly the solutions have sometimes been found to be triggered by physical cues (back aches…). This presents a dilemma; our mind shows limited rationality and we are subject to lots of psychological fallacies and yet when we ignore the intuition of the seasoned investment professional, performance is shown to go down. How does one build a process that protects against biases, keeps a rational analysis in various situations and which also allows intuition to tip the scales? Koppel proposes that intuition is used to generate investment ideas and that research is used as a second step. The order probably depends on what investment style the investor uses in general.
Theory of Mind (ToM) is the ability to recognize and understand the emotions and state of mind of other investors. With the ability comes the chance of predicting the action of other investors. This ability depends on both a strong awareness of oneself and of the market. ToM connects nicely to Andrew Lo’s adaptive market theory. In a market of constant adaptive change the investor who can read the emotions of others has a distinct advantage. Koppel also presents research that finds a positive correlation between a highly developed ability to read other’s state of mind and trading results. “Trading is essentially a social activity” as one of the researchers puts it.
This is a book that lacks a sense of direction. Just as a trader needs a system a book needs a structure. The chapters that are stacked on one another are mostly listings of various erroneous behaviors and it feels like the author's joy in having found scientific backing to his past experiences has prevented him from focusing on what he wants to put forth. The text is too much a random selection of facts about behavioral finance mixed with a dose of trading smartness. Luckily, the facts are interesting and Koppel is well read.
July 8, 2013
I decided to read this book because I was curious as to the antices behind the market. Before I ever took cotporate finance, I though investment was a number rigid subject. Reading this book, gives incite into the everday perspective of investing. The author makes good metaphorical use of examples; the examples really put the reader in the drivers seat. I have come to understand the disciplines and processes so essential to the investing environment. The author is merciless with his arguement on market approach and really exaggerates the numerous chanellages that investors face. I totally agree with the authors perspective on positivity and agree with his ideas why is is so difficult. The book targets the human mind in the face of decisions and also money.
Displaying 1 - 3 of 3 reviews