Inside the Investor's Brain: The Power of Mind Over Money

by Richard L. Peterson

Unique insights into how the mind of an investor operates and how developing emotional awareness leads to long-term success Inside the Investor's Brain provides readers with specific techniques for understanding their financial psychology, so that they can improve their own performance and learn how to outsmart other investors. Chapter by chapter, author Richard Peterson addresses various mental traps and how they play a role in investing. Through examples, such as a gambling experiment with playing cards, the author shows readers how being aware of the subconscious can separate the smart investors from the average ones. This book also contains descriptions of the work of neuroscientists, financial practitioners, and psychologists, offering an expert's view into the mind of the market. Innovative and accessible, Inside the Investor's Brain gives investors the tools they need to better understand how emotions and mental biases affect the way they manage money and react to market moves.

Genres: Finance, Psychology, Business, Economics, Nonfiction

416 pages, Hardcover

First published January 1, 2007

Reviews

[Kursad Albayraktaroglu · Rating 4 out of 5]

"Inside the Investor's Brain" is a very interesting book centered around the author's experiences working with traders and investors, supported by findings of neuroscience studies on investor psychology.

There are different chapters on how emotions, cognitive biases, and various other factors impact our investment decisions. Some of the scientific studies are truly eye-opening, and there are actionable ideas and suggestions throughout the book.

This has long been an interesting subject to me, and I am a huge fan of authors like Jason Zweig who regularly write on the topic. So a comparison to Zweig's earlier book "Your Money and Your Brain" was inevitable. I believe that Zweig's book was somewhat more readable and applicable for a general audience, while "Inside the Investor's Brain" is perhaps more oriented towards active traders. The books nicely complement each other : Peterson's book goes into more details and explains the findings of the scientific experiments better; while Zweig's book is a bit more interesting to read and usually provides a good introduction to complex neuroscientific concepts and cognitive biases.

Highly recommended.

[Steve · Rating 4 out of 5]

Very underrated investment book. Some of what was in here just solidified some things I already knew. However, here are some of my takeaways that were either new to me or very important to remember if I already knew:

1. "The higher the stakes, the harder it is for people to think clearly about risk."
2. Confidence, extroversion and an open mind contribute to investing success.
3. People are bad at judging probabilities and identifying meaningful patterns. They find patterns, though, but are they really useful?
4. Manage your stress to become a better investor.
5. "Most people handle time as poorly as they handle probability." This has to do with delayed gratification.

[Abbas Khan]

It is virtually impossible for any market to be fully efficient, and it remains far beyond human capability to predict it with complete accuracy. However, by striving to understand and regulate the human mind, an investor can improve decision-making and achieve better returns. Both human emotions and external environmental factors can influence whether one takes short or long positions. In this regard, this book helps us understand human emotions and how they influence our decisions in the market. Therefore, a combined effort to understand psychological dynamics and environmental conditions can significantly enhance market performance.

[M Junaid · Rating 1 out of 5]

Interesting & adorable book I've ever read

[JP · Rating 3 out of 5]

This weighty tome covers all of the latest research in neurofinance, from the biochemistry of the brain to the behavioral economics studies by Dan Ariely. It's not a page turner, but does read easily and makes it easy to find specific topics of interest. Key points include: you need feelings to correctly interpret risk, some of these psychological effects are reduced if consciously examined, a Warren Buffet quote made at the age of 21 (Be fearful when others are greedy. Be greedy when others are fearful.), victory/Nobel/CEO disease, 4 drivers of success (personality style, cognitive faculties, emotional intelligence, conditioning), the big 5 personality traits (neuroticism, openness, extraversion, conscientiousness, agreeableness), people follow what they can process (stocks with clever names appreciated nearly twice as much as others).

[Larry · Rating 4 out of 5]

This book reminded me a lot of John Coates's The Hour Between Dog and Wolf: Risk Taking, Gut Feelings and the Biology of Boom and Bust, but I found Peterson's book much more expansive and is an obvious forerunner to Coates's book, which is focused more on institutional trading. Published in 2007, it seems to me that this was probably one of the first books to popularize all of these neuroscientific/human behavioral in the financial markets studies that were done around the turn of this new century. It has probably also been overlooked since I don't really see it on too many others' reading lists.

[Jack · Rating 4 out of 5]

A better than usual collection and especially interpretation of psychology studies which speak to how people try to invest their money, why and how they screw themselves, and what one may do about that...with lots of time and interest in improving oneself. Bottom line, if you want money money money, you're already in trouble, but if you're willing to be successful as an incidental result of a relentless study to improve your own wrong thinking and unhelpful feelings, then there may be hope.

[Ken · Rating 4 out of 5]

ground breaking and original.

good read for investors, gamblers, or for those who are interted in how the mind works. Highly recommended.

[Kelly · Rating 1 out of 5]

This was awful! If you must read a book on this subject , may I suggest Thinking fast and Slow by Daniel Kahneman.

[Samuel Gruen · Rating 2 out of 5]

Not what I was expecting, which explains my disappointment with the book. I'll put it aside for some time and come back to it when I want a real neurological study of the brain in risk situations.

[J Brown]

I like taking the cover off the books that I purchase. This book turns out to be quite attractive. It is filled with passages on a variety of subjects and gives some keen insights to common terms and phrases found in the investing world. I found this helpful. Somewhere locked inside this book was an idea for writing my own book. For that alone I am thankful that I purchased and read this copy. I also thought that the author finished the book nicely.