By Jason Zweig | Nov. 12, 2016 9:07 pm ET
Image credit: Edvard Munch, “Summer Night’s Dream (The Voice)” (1893), Museum of Fine Arts, Boston, via Wikimedia Commons
I was recently reminded at a behavioral finance conference that a chapter excerpted from my book Your Money and Your Brain is available with the publisher’s permission as a freely downloadable PDF. In fact, it is part of an excellent anthology published in 2010, Behavioral Finance and Investment Management, featuring contributions from some of the best minds in the field. You can download any chapter of the anthology at will.
In explaining why I thought investors should read this chapter, I wrote:
Folk wisdom on Wall Street has long held that the two emotional extremes of investing are fear and greed. It just so happens that neuroscientists have made significant discoveries in recent years about how fear is generated in the human brain. They have also explored how it shapes memory, changes judgments about risk and time, and skews behavior.
As Benjamin Graham understood and Warren Buffett has also exemplified, investing is above all about self-control. You stand no chance of making sense out of the markets if you cannot govern your own emotions. One of the central lessons both of behavioral finance and of neuroeconomics is that we are often in the grip of emotions without even realizing it. I hope this article enables investment professionals to recognize the importance of thinking more deeply about the hidden forces that can drive our decisions.
The chapter is called “Fear.” It’s always been my hope that by better understanding what makes you afraid, you can better control that feeling and reduce the odds that it disrupt your long-term financial plans at the worst possible time.
Click here for the PDF of the chapter: “Fear.”
Source: Your Money and Your Brain
