Outsmarting the Smart Money - Hardcover

Cunningham, Lawrence

Hardcover

ISBN 10: 0071386998 ISBN 13: 9780071386999

Publisher: McGraw-Hill Education, 2002

Synopsis

This volume looks at how investors can rethink their learning about investments. The author argues that many investors are inadvertently building their portfolios on shaky foundations, based on preconceived notions about the markets, misleading and exploitative information and a lack of knowledge and understanding. This book aims to help readers recognize where the dangers are and how to avoid making costly mistakes. Despite claims that the stock market is efficient and rational, Cunningham asserts that investors actually operate in a world that is full of messy decision-making. In fact, emotions, biases and behaviour all play an equal role with cold analysis and probability theory. Loss aversion, frame dependence and probabilities combine to make investing a challenging undertaking. In order to succeed, investors must outsmart the "big money" and become smart investors themselves. The first challenge is overcoming the biases and misconceptions that shape them. Cunningham shows that behavioural baggage often means that investors are actually drawn toward opportunities that exploit them. Because of that, it is easy for insiders and "the smart money" to take advantage of investors. Cunningham explains why it is important for investors to understand the biases that put them at a disadvantage. He shows how investors can learn to avoid succumbing to the spin in various business and financial reports. And, he reveals how important it is to wake up to market inefficiency and how this inefficiency is exploited by financial professionals. In doing so, he aims to give readers the tools they need to think for themselves and invest for the long term. This book provides a useful source for learning about the behavioural forces and cognitive biases that affect investment strategy.

About this title

From the Publisher:

A sophisticated investor s guide to turning to their advantage various personal biases, misleading information, and market inefficiencies to outsmart the pros
 Explanation of the ways in which behavior makes markets inefficient
 How to recognize individual biases that may impede successful investing
 Understanding the dangers of benchmarking
 How to avoid being cheated by money managers
 How to play the numbers game to your advantage
 How to spot the associated risks of margin trading and market bubbles
 What to do during times of market mania

From the Back Cover:

Forget Almost Everything You've Ever Learned About Investing...

Most investors­­despite the fact their hard-earned savings are on the line­­fall victim to human nature and bet their financial futures on hot tips, headlines, and Wall Street spin. Outsmarting the Smart Money instead provides investors with authoritative insights and hands-on lessons for moving beyond emotions and unreliable guesswork to build a portfolio based on market-proven strategies, simple-to-understand analytical techniques, and a history of long-term performance.

Praise for Outsmarting the Smart Money...

"Individuals too often focus exclusively on the mechanics of investing without considering the mistakes that occur from emotional, but predictable, missteps. Larry Cunningham has done a great service by explaining the psychology of investing in clear and easy to understand principles."­­Robert G. Hagstrom, CFA, Senior Vice President, Legg Mason Funds Management; Author, The Warren Buffett Way

"This book is a fascinating account of market psychology, of how professionals lose their shirts because of it, and of how a small investor can profit from it. A fun, useful and readable book."­­Andrei Shleifer, Professor of Economics, Harvard University; Author, Inefficient Markets

"Outsmarting the Smart Money reveals the many foibles of today's markets, and provides sound strategies the typical investor should pursue to achieve security and profits."­­James D. Cox, Brainerd Currie Professor of Law, Duke University

"An exploration of the ways our psyches play financial tricks on us, Outsmarting the Smart Money will return its cost many times over."­­Gary Belsky, Author, Why Smart People Make Big Money Mistakes­­And How to Correct Them

"Lucid guidance for investors dealing with the post-bubble investment world, while also preparing them for the next period of irrational exuberance."­­Steve Galbraith, U.S. Equity Strategist, Morgan Stanley

"We have met the enemy, and he is us."­­Walt Kelly's Pogo

Like it or not, most investors are their own worst enemies. They buy only when glowing reports and rumors have bid stocks to outlandish, unsupported price levels; sell only when bad news has left stock prices at or near their bottoms; and ignore reams of independent research and data to bet thousands of dollars on a coworker's hot stock tip.

Is it any wonder that stock investing, which should represent one of the easiest and most straightforward paths to long-term wealth, has instead become a hotbed of wasted hours, lost opportunities, and outright misery?

Lawrence Cunningham's Outsmarting the Smart Money outlines where most investors go wrong and explains how to approach the markets with self-knowledge, intelligence and, most of all, calm. It examines the cognitive biases that afflict most investors, discusses how professional money managers are trained to take advantage of these biases (and the pricing inefficiencies that regularly result), and reveals how investors can help themselves by steering clear of the "smart money" to adopt a long-term, value-oriented investment philosophy.

Outsmarting the Smart Money offers you dozens of easy-to-follow tips and techniques for investing both sensibly and successfully, including:

-How the market really works, and why the safest ways to use it to your advantage are actually also the easiest
-The folly of investing in initial public offerings­­and how and when IPOs actually can present valuable opportunities
-Accounting games and gimmicks that managers use to hide information and mislead investors
-The differences between price and value­­and how to ignore the former to focus on the latter
-Techniques for understanding­­and overcoming­­personal investment biases and shortcomings

Thousands of books promise to tell you how to beat the markets by grabbing the low-hanging fruit of fast turnaround profits. But only Outsmarting the Smart Money tells you the truth­­that long-term investment success requires time, self-knowledge, and discipline. Follow its simple step-by-step program to become a more intelligent investor, and construct a sensible long-term portfolio that is solidly constructed, easy to manage, and virtually certain­­given time­­to grow into a sizable fortune.

About this edition

• Publisher: McGraw-Hill Education
• Publication date: 2002
• ISBN 10: 0071386998
• ISBN 13: 9780071386999
• Binding: Hardcover
• Number of pages: 288