Your Money and Your Brain
Book

Your Money and Your Brain

How the New Science of Neuroeconomics Can Help Make You Rich

Jason Zweig
Simon & Schuster, 2007
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Editorial Rating

9

Qualities

  • Innovative
  • Applicable

Recommendation

Jason Zweig tackles two daunting subjects – neural research and finance – and manages to make both of them accessible and interesting to a general audience. This long overdue book is not the first to apply the lessons of cognitive and behavioral research to personal investing, but it is certainly among the most comprehensive, credible and clearly written of such books. Much of the material will be familiar to students of cognitive science. If you have already read a lot about personal investing, you will find reminders, rather than new material, in Zweig’s advice about investment decisions. Nevertheless, getAbstract finds that he offers useful hands-on information and entertaining anecdotes as he explains why you should listen to your instincts and emotions when you invest.

Summary

Economics and the Brain

Much of the conventional wisdom about investing is erroneous. It suggests that investors are rational analysts who work hard to understand the probable performance of their investments. The assumption is that the harder you work and the more you understand, the better you will do. In fact, ample evidence shows that knowledge, understanding and hard work do not necessarily correlate with investing success. Even Nobel laureates, who understand perfectly well the economic logic of investing, often are not successful investors. Success requires more than knowledge, reason and study.

The human brain does not make financial decisions strictly on the basis of monetary gains and losses. Other factors are at work, including surprise, happiness, fear, risk, greed, intuition, emotions and perceptions. Emotions are not the enemy of reason: They are necessary and helpful, provided that investors know how to use them.

Knowledge and Emotions

The popular notion that everyone has two brains has some truth. But the distinction between right and left brain is not as crucial as that between a lower and an upper brain, or “reflexive” and “reflective...

About the Author

Jason Zweig is a senior writer and guest columnist for Money Magazine and CNN.com. He is also the editor of the revised edition of Benjamin Graham’s The Intelligent Investor. Zweig is the co-author of Where Are the Customers’ Yachts or A Good Hard Look at Wall Street and Equity Analysis Issues, Lessons and Techniques.

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