I finally got around to reading Jason Zweig’s widely acclaimed book “Your Money and Your Brain” last week while on holiday up north. The book is mainly about human psychology and how it affects your emotions when it comes to money. We have a lot of instincts and emotions which helped us survive when we were cavemen and still serve us well today in a lot of situations – however they are counter-productive when it comes to investing.
photo by Image Editor
First off – I want to say that this book is quite excellent. Everyone should read this book – whether you are an avid investor, a casual investor or even if you don’t invest because you are afraid of losing money. Reading this book will help you understand your basic investing instincts and learn how to react differently.
What I liked
This book is very well written and researched – Zweig includes many examples of psych studies which he then ties in to your emotions around money and help understand that while you might think you are consciously making rational investment decisions, in actual fact it might be your human biology which is influencing your decision making capability.
An example is the rush you feel when you think an investment is going to give you a return – we think of this as “greed” but in fact there are parts of your brain which “light up”. This same reaction will occur in anticipation of many things, winning a jackpot, anticipating sex etc. The point he makes is that if you think you have a “hot tip” or some other great investment idea and you can’t stop drooling about it – take a minute to think about it – or a few days. Hopefully giving yourself time to cool off will allow the rest of your brain to weigh in on the decision and you can make the right one.
What I didn’t like
I thought the book was a bit too long – although it was full of great information, I found by about 2/3 of the way through I was starting to think “Ok, every one of my financial thoughts are caused by my biology – got it!”. It is still worth reading the entire book however.
Read this book! There are some excellent books available (Four Pillars of Investing, Random Walk Down Wall Street) which do a great job explaining why you shouldn’t try to time the market, why you shouldn’t sell when the market does poorly and why you shouldn’t buy when the market does well but Zweig explains why your biology makes you want to do those kind of destructive financial behaviours.
Other reviews of this book
Canadian Capitalist loved this book.
My Money Blog thought is was a good book, but he agreed with me that it was too long.