Title: Behavioral Finance and Wealth Management: How to Build Optimal Portfolios That Account for Investor Biases / Edition 2
Author: Michael Pompian
ISBN-10: 1118014324
ISBN-13: 9781118014325
Behavioral Finance and Wealth Management How to Build Investment Strategies That Account for InvestorBiases Since the first edition of Behavioral Finance and WealthManagement was published—in the wake of the bursting of thetechnology bubble in 2000—the world faced yet another economiccrisis in 2008. Accompanying this crisis is a new level of marketvolatility, and both investors and advisors can benefit from adeeper understanding of behavioral finance and how it can help themachieve their long-term financial goals. That’s why author MichaelPompian, a wealth manager and practitioner at the forefront of thepractical application of behavioral finance, has written the secondedition of this book. As an investment advisor, Pompian understands the behavioralbiases that investors have. He has discovered specific ways toadjust investment strategies for these biases and in the SecondEdition of Behavioral Finance and Wealth Management, Pompian helpsinvestors and their advisors develop a heightened awareness ofthese biases so that financial decisions, and resulting economicoutcomes, can be improved. Divided into six comprehensive parts, this reliable guide openswith an introduction to the basics of behavioral finance, focusingon the aspects most relevant to individual wealth management. Fromhere, Parts Two (Belief Perseverance Biases), Three (InformationProcessing Biases), and Four (Emotional Biases) define andillustrate a total of twenty of the most importantbiases—within the cognitive-emotional framework—forconsidering potential biases. For each of the twenty biases,Pompian uses the same basic format in discussing the bias, in orderto promote greater accessibility. After covering the foundations of behavioral finance, thebiases, Part Five turns to the main focus of this book: practicalapplication of behavioral finance for investors and advisors. Thissection establishes a basic framework for integrating behavioralfinance insights into portfolio structure and presents the conceptof best practical allocation. It then takes the concepts presentedand applies them in a case study format to reinforce learning. Rounding out this detailed discussion, Part Six ties togethermany of the concepts covered in the book and introduces a newconcept Pompian has developed to make behavioral finance easier toapply in practice. The idea of Behavioral Investor Types (BITs) isintroduced along with the investment biases that are associatedwith each one. Updated to reflect current market conditions, this reliableresource skillfully illustrates investors’ behavioral biases indetail and offers financial advisors and their clients practicaladvice about how to apply the science of behavioral finance toimprove overall investment decision making.
