Best Behavioral Finance Books: 5 Must Read Books

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I think you’ll agree with me when I say:

It’s REALLY hard to act as a rational investor your entire life.

Investing in anything means moments of doubt, questioning your decision making, and yes, accepting losses.

But does it have to be?

Well, it turns out, there’s a lot of exciting new research in the field of behavioral finance.

Unfortunately, studying behavioral finance will not help you eliminate mistakes. Instead, it allows you to prevent the losses that could really hurt you.

Charlie Munger has said, “You can learn to make fewer mistakes than other people- and how to fix your mistakes faster when you do make them.”

And that’s the goal when it comes to studying behavioral finance.

In today’s post, I’m going to share with you the best behavioral finance books, starting with a book about Munger himself.

Best Behavioral Finance Books

Seeking Wisdom: From Darwin to Munger by Peter Bevelin

Charlie Munger credits his success to his multi-disciplinary approach to investing.

Munger not only takes the best concepts from his field of investing. He also has takes the best concepts from fields like physics, psychology, and mathematics.

In Seeking Wisdom: From Darwin to Munger author Peter Bevelin explores how great minds such as Darwin, Munger, Buffett, Einstein, and Feynman others have gone about decision making.

The Little Book of Behavioral Investing: How not to be your own worst enemy  by James Montier

Looking for an introductory book into behavioral finance?

Successful portfolio manager James Montier gives his readers an easy to understand guide on avoiding mistakes in The Little Book of Behavioral Investing: How not to be your own worst enemy.

As with most books written in the “Little Book” series, the book is easy to understand and the ideas are very actionable (or in this case, unactionable).

Misbehaving: The Making of Behavioral Economics by Richard H. Thaler

You can’t study behavioral finance without coming across the research of Richard Thaler.

An author of five different books of behavior finance, as well as Professor of Economics and Behavioral Science at the University of Chicago’s Graduate School of Business–Richard Thaler’s work is well respected in the field.

His latest book Misbehaving: The Making of Behavioral Economics by Richard H. Thaler, combines his years of research into one excellent book.

Thinking, Fast and Slow by Daniel Kahneman

One could foresee the field of behavioral finance was about to explode when psychologists won the Nobel Prize in Economics.

Daniel Kahneman, the winner of the Nobel Prize, wrote a book that’s considered the most useful explanation of how the mind works.

In Thinking, Fast and Slow Kahneman breaks our thoughts in System 1 and System 2 thinking. By understanding these systems of thinking, we can help shape our judgments and decisions

Extraordinary Popular Delusions & the Madness of Crowds by Charles Mackay

Originally published in 1841 Extraordinary Popular Delusions and the Madness of Crowds shows that economic bubbles have existed long before the stock market.

With stories from famous bubbles such as The Mississippi Company, South Sea Company, and Tulip Mania, Mackay provides plenty of insight into how humans have committed financial folly over time.

What makes this book so popular today is that history has shown to repeat itself. Whether the internet bubble of the late 90’s to the housing crash in 2008, the same principles of human behavior are around today.

R.J. Weiss
R.J. Weiss is the founder and editor of The Ways To Wealth, a Certified Financial Planner™, husband and father of three. He's spent the last 10+ years writing about personal finance and has been featured in Forbes, Bloomberg, MSN Money, and other publications.

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