James Montier's The Little Book of Behavioral Investing: How not to be your own worst enemy (Little Books, Big Profits (UK))is an introduction to behavioral finance from one of today's top investment strategists. The field of behavioral finance is the study of the influence of psychology in the investment process. It is a relatively new field of study and typically receives little attention in most investment and trading books. However, Montier's book provides a solid foundation and insight to this fascinating field. It is applicable for individual and professional investors alike and offers new insight into the often-overlooked aspect of our investment decisions – our self.
A discussion of psychology is essential in order to understand behavioral finance and Montier cites numerous psychological or medical studies to support his arguments for how to make better investment decisions. While the book is littered with study citations, it is far from dry academic work. The references are intriguing, surprising, and relevant to our investment decisions. The greatest strength of the book is that Montier clearly researched the field of psychology in-depth and he applies the lessons of several studies – many of which were not conducted as "behavioral finance" studies – to our investment decision-making.
Montier's book is a short read and a solid introduction to behavioral finance. Individual investors with little or no background in psychology or behavioral finance will not have difficulty with this book. It is an easy read, entertaining at times, and provides a solid foundation for further studying and understanding one's self. Readers with an extensive background in behavioral finance or psychology will not find any ground-breaking material, but it is an entertaining read nonetheless.
Montier's lessons are applicable to both the investment and non-investment world, and even if you do not manage your own money, you will still find value in this book.