9781118011508

Behavioral Finance and Investor Types : Managing Behavior to Make Better Investment Decisions

by
  • ISBN13:

    9781118011508

  • ISBN10:

    1118011503

  • Edition: 1st
  • Format: Hardcover
  • Copyright: 7/3/2012
  • Publisher: Wiley
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Supplemental Materials

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  • The New copy of this book will include any supplemental materials advertised. Please check the title of the book to determine if it should include any access cards, study guides, lab manuals, CDs, etc.

Summary

Achieve investing success by understanding your behavior type This groundbreaking book shows how to invest wisely by managing your behavior, and not just your money. Step by step, Michael Pompian (a leading authority in the practical application of Behavioral Finance concepts to wealth management) helps you plan a strategy targeted to your personality. The book includes a test for determining your investment type and offers strategies you can put into use when investing. It also includes a brief history of the stock market, and easy-to-comprehend information about stocks and investing to help you lay a solid foundation for your investment decisions. Behavioral Finance and Investor Types is divided into two parts. Test Your Type, gives an overview of Behavioral Finance as well as the elements that come into play when figuring out BIT, like active or passive traits, risk tolerance, and biases. The book includes a quiz to help you discover what category you are in. Plan and Act, contains the traits common to your type; an analysis of the biases associated with your type; and strategies and solutions that compliment and capitalize on your BIT. Offers a practical guide to an investing strategy that fits both your financial situation and your personality type Includes a test for determining your tolerance for risk and other traits that will determine your investment type Written by the Director of the Private Wealth Practice for Hammond Associates-an investment consulting firm serving institutional and private wealth clients Behavioral Finance and Investor Types offers investors a better sense of what drives them and what puts on their breaks. By using the information found here, you'll quickly become savvy about the world of investing because you'll come to understand your place in it.

Author Biography

MICHAEL M. POMPIAN, CFA, CAIA, CFP, is a partner at Mercer Investment Consulting (formerly Hammond Associates) serving institutional and private wealth clients. Prior to joining Mercer, he worked at Merrill Lynch and PNC Private Bank, as well as the investment staff of a family office. Pompian holds the Chartered Financial Analyst (CFA) designation, is a Chartered Alternative Investment Analyst (CAIA) and a Certified Financial Planner (CFP). He is also a member of the CFA Institute (formerly AIMR) and the New York Society of Security Analysts (NYSSA). He holds a BS in management from the University of New Hampshire and an MBA from Tulane University. He is a regular speaker on the subject of behavioral finance and has published numerous articles on the subject. He is married with three sons and can be reached at mpompian@hotmail.com.

Table of Contents

Forewordp. xi
Prefacep. xiii
Acknowledgmentsp. xxi
Introduction to Behavioral Financep. 1
Why Reaching Financial Goals Is Difficultp. 3
Nonfinancial Examples of Self-Defeating Behaviorp. 4
Financial Examples of Self-Defeating Behaviorp. 8
Summaryp. 11
Notesp. 12
Overview of Behavioral financep. 13
Behavioral Finance: Micro versus Macrop. 14
Standard Finance versus Behavioral Financep. 15
The Role of Behavioral Finance with Private Clientsp. 22
Practical Applicationsp. 22
Notesp. 24
The Building Blocks: Behavioral Biasesp. 25
Cognitive Biasesp. 27
Emotional Biasesp. 38
Summaryp. 43
Notesp. 44
Personality Theoryp. 45
Introduction to Personality Theoryp. 47
History of Personality Theoryp. 48
Four Main Personality Theoriesp. 50
Notesp. 65
The History of Personality Testingp. 67
Types of Personality Testsp. 67
Summaryp. 77
Notesp. 77
The Behavioral investor Type Frameworkp. 79
Reviewing the Original Processp. 81
The Behavioral Alpha Process: A Top-Down Approachp. 81
Updates to the Previous Modelp. 85
Updated BIT Theory and Applicationp. 87
Summaryp. 89
Behavioral Investor Type Diagnostic Testingp. 91
Step 1: BIT Orientation Quizp. 92
Step 2: Bias Identification Quizp. 94
Summaryp. 100
Explanation of the Behavioral Investor Typesp. 101
The Preserverp. 103
Upside/Downside Analysisp. 104
Bias Analysisp. 105
Other Biasesp. 107
Advice for Preserversp. 109
The Followerp. 111
Upside/Downside Analysisp. 112
Bias Analysisp. 113
Other Biasesp. 117
Advice for Followersp. 119
The Independentp. 121
Upside/Downside Analysisp. 122
Bias Analysisp. 123
Advice for Independentsp. 133
The Accumulatorp. 135
Upside/Downside Analysisp. 136
Bias Analysisp. 137
Other Biasesp. 141
Advice for Accumulatorsp. 144
Plan and Actp. 147
Capital Markets and Asset Classesp. 149
Overview of Asset Classesp. 150
Publicly Traded Equity Investments (Stocks)p. 154
Fixed Income Investments (Bonds)p. 163
Hedge Fundsp. 172
Real Assetsp. 176
Simple Portfolio Constructionp. 180
Summaryp. 182
Notesp. 182
What Is Asset Allocation?p. 183
The Importance of Assumptionsp. 185
The Importance of Strategic Asset Allocationp. 186
Considerations for Individual Investorsp. 188
Why Asset Allocation Is So Importantp. 197
Summaryp. 200
Notesp. 200
Financial Planning: A Crucial Stepp. 201
What Is Financial Planning?p. 202
Working with a Financial Plannerp. 203
What Is a Certified Financial Planner?p. 205
Who Can Provide Financial Planning Services?p. 209
Summaryp. 212
Notesp. 213
Investment Advice for Each Behavioral Investor Typep. 215
Foundations of Best Practical Allocationp. 216
Guidelines for Determining When to Moderate and When to Adaptp. 217
Best Practical Allocation for Preserversp. 219
Best Practical Allocation for Followersp. 222
Best Practical Allocation for Independentsp. 224
Best Practical Allocation for Accumulatorsp. 227
Summaryp. 229
Notep. 230
Indexp. 231
Table of Contents provided by Ingram. All Rights Reserved.

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