THE BEHAVIORAL INVESTOR (BY DANIEL CROSBY)

As an Amazon Associate I earn from qualified purchases.

This is an animated video summary of the most important takeaways from Daniel Crosby’s The Behavioral Investor, a 2018 book taking a modern approach behavioral investing.

Top 5 takeaways:
00:00 Intro
00:27 1. 4 Behavioral Risks Crushing Your Investment Returns
04:02 2. How to Manage the 4 Behavioral Risks
09:05 3. How to Design a Winning Rule-Based System
11:26 4. Why Value Investing Works
13:17 5. Why Momentum Investing Works

TL;DW:
- To become a great investor, you must learn to suppress your ego, avoid conservatism in your stock pickings, paying more attention to numbers than stories and that no good investments are made under powerful emotional influence
- Cope with ego by spreading your money across at least a few different stocks, conservatism by flipping the script and asking, “why not?”, instead of “why?”, attention by playing the odds and emotions by automating and learning to recognize your emotions.
- A winning rule-based stock picking system should have empirical support, theoretical support and (some) psychological pain attached to it
- Value investing a la Warren Buffett and Benjamin Graham fulfills these criteria
- Momentum investing also fulfills all of the criteria for a winning rule-based stock picking system

My goal with this channel is to help you make more money and improve your personal finances. How to become a millionaire? There are many ways to get there – investing in the stock market, becoming a stock trader, doing real estate investing, or why not becoming an entrepreneur? But whether you are interested in how to invest in stocks or investing strategies for creating passive income with rental properties – I hope to be able to provide you with a solution (or at least an idea) here. Warren Buffett - the greatest investor of our time - says that you should fill your mind with competing ideas and then see what makes sense to you. This channel is about filling your mind with those ideas. And in the process – upgrading your money-making toolbox.

[vismaypatel]

I am amazed how videos with titles such as" top 10 stocks to buy" has got much more views than real content like this. Smh.

[grahambutler]

A little on behavour 1 - Ego: We tend to overestimate our strengths - Dunning Kruger effect. Additionally, ego forces us to seek out information that affirms our thoughts - Cognitive bias. Once we have two conflicting thoughts the ego will protect itself and go with the bias one - Cognitive dissonance, which we then blame on the markets. The inverse would also but detrimental - The imposter syndrome: where you lack action due to events outside your expertise.

[Stjernberg]

Stock question: Depends how risk averse you are. Both stocks have a positive expected value, but B is better for the risk averse, where as stock A is better if you are risk neutral.
Expected value A: 0, 9 * -10 % + 0, 1 * 300% = -9% + 30% = 21 %
Expected value B: 0, 1 * -10 % + 0, 9 * 20 % = -1% + 18 % = 17 %

Thanks for great content btw, keep it up! :)

[umarsebyala]

These are really nice videos, keep up the good work. I personally find it hard keeping my emotions out of my trades!

[sunchew]

Hi, This is Sun Chew, the editor of Business Today Magazine Publisher from Taiwan. We are going to publish the complex Chinese version of THE BEHAVIORAL INVESTOR in Taiwan.
I am very excited to see this video. You really made it very interesting and we love it very much!!!
Therefore, I would like to ask if you are willing to authorize us to use this video in Taiwan after attaching Chinese subtitles?

[remussirca]

The question was really interesting and I've discussed it with some friends as well (10$ for each bet)
Stock A
9x return 9 USD instead 10 USDinit bet (81 USD) (losing 10%, 90% of the time)
+ 1x lucky strike return 40 USD (wining 300%, 10% of the time )
Total bet on A 100 USD total won 121, Return 21% !! <- winning one?

Stock B
1x losing 10% 9 USD instead 10 USDinit bet (10% risk of losing 10%)
9x wining 20% => 12 USD * 9x = 108 USD
Total bet on A 100 USD total won 117, return 17% !!

At the same time risk reword
Stock A 9 : 30
Stock B 1: 18 <- winning one?

[Bladeczek]

Man, do I love your sense of humour in those videos (of course beside them being useful) I laughed quite a few times on this one. Thank you.

[Iburn]

If you can survive long enough to "learn" the market.... You'll open a door that most people only dream of seeing

[apboutique]

Loving the great videos and book recommendations that come with. Thanks!

[futuresense]

According to kelly criterion, one should invest 7% of one's portfolio into stock A and 85% into stock B

[robertmelvin]

Personally I liked 1. "4 Behavioral Risks Crushing Your Investment Returns", 2. "How to Manage the 4 Behavioral Risks" and 3. "How to Design a Winning Rule-Based System". I felt #4 deviated from Behavior and focused on the Buffett approach. Your 3 Part written summary under "Show More" is awesome and overwhelming. Will you do a review of Crosby's "The Laws of Wealth"?

[salomeperetz]

Very interesting content ; great learning today!🙂

[aSwisshousewife]

Thank you, Swedish Investor :) This is very helpful.

[retsoptihs]

Excellent take as always, although I do question Daniel's somewhat contradictory advice. He says you should cut your losses but also that you shouldn't worry about bear markets. That would leave a beginner very confused as to what they're supposed to do in such situations. Because if there's a bear market and you've just started investing, it's likely that all of your investments will be in the red. So I cannot agree with simply cutting your losses unless you have reason to believe (based on data) that the intrinsic value of your asset has depreciated since you acquired it.

[xho]

I think that the 5th point is more speculative, and it refers to *trading* more than *investing*
But still it is my opinion

[yasinarshad]

Just Subscribed now. Awesome work dear

[jayhay]

Thanks for the review. I'm adding this book to my list. I've been working my investing game for 20+ years and read probably 50 books. Investing should be a personal development experience. My contribution of learned/experienced advice? As a final litmus, ask yourself: "would I feel happy and confident about losing (unrealized) money in this investment?" That has been epiphany for me

[sergiobravo]

Really interesting! And thanks again for sharing this. This book seems like a summary of other books. It has many ideas from the book by Dani Kahneman.

[thomasguinay]

Hello, BRAVO !, i start to watch your channel 3 days ago and 12 videos..., very good work,
i join Vismay Patel, this video ( i will buy the book, the first in english of my life :) ) is very interesting, i like the empirical and theorical support and pain :) !!! this is why this is works the PAIN !
and only 72 000 views !!!!
have a nice day and to be continued thanks a lot

[akoaywaladito]

Thanks TSI.
Cool stuff, great video. Keep it up.