What Investors Really Want

The book What Investors Really Want: Know What Drives Investor Behavior and Make Smarter Financial Decisions by Meir Statman covers the latest buzzword on Wall Street, 'behavioral finance.' This is the study of why investors make the mistakes they do from an emotional and psychological standpoint.

Statman discusses what goes through the minds of investors when they make decisions, how investors look at risk versus reward, and how to deal with the would-have, could-have, and should-have of financial losses. The book shows how to recognize your own emotions when you decide what, where, and when to invest.

As a fan of the history of bubbles and scams, I really enjoyed chapter 5, We Join Herds and Inflate Bubbles. The herd mentality cuts across all countries, cultures, ethnic groups, and income levels. Plenty of related stories are included in this chapter, along with all other chapters. In addition, all references are annotated with very extensive endnotes.

If you want to find out more about the science of investor behavior, get What Investors Really Want: Know What Drives Investor Behavior and Make Smarter Financial Decisions.