Investment Madness
John R. Nofsinger
 Good description of the psychological biases that affect investors.
The book is highly recommended because it is very easy to read, which is not
often the case with this important subject.
Just by reading
the examples, you will identify yourself to some of the investors and
therefore discover the main biases that affect you. Identifying your main
psychological biases is a very important step in improving your investing.
However, the proposed solutions are only trivial. You may be disappointed at
that point. Now, the table summary in chapter 15 is quite handy and the author
suggests to review it annually: not a bad idea.
The main solution of interest is that of controlling your investing environment.
Someone who wants to diet does not keep junk food in the house. Similarly, in
investing you should avoid putting yourself in situations where a psychological
bias may surface. A simple example is Herd Mentality (following the crowd): to
minimize Herd Mentality, reduce your exposure to the media and do not check your
investment everyday. By avoiding the situations that cause
a psychological bias to surface, you will reduce emotional mistakes.
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