Why smart people make big money mistakes and how to correct them

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Caractéristiques

Auteur : Gary Belsky & Thomas Gilovich
Publication : 2000 (1ere édition en 1999)
Editeur : Fireside
ISBN : 0-684-85938-6
Nombre de pages : 220
Prix : 14,39 Euros


4ème de couverture

"A terrific introduction to the emerging science of behavioral finance, which identifies the ways in which investors' minds play tricks on them."
MONEY MAGAZINE

Why do so many otherwise smart people make foolish financial choices ? Why do investors sell stocks just before they skyrocket--and cling to others as they plummet ? Why do shoppers overspend when using credit cards rather than cash ? What do our habits of tipping or buying lottery tickets indicate about our relationship with money ? In this fascinating investigation of the ways we spend, invest, save, borrow, and waste money, Gary Belsky and Thomas Gilovich reveal the psychological causes--the patterns of thinking and decision making--of irrational behavior. Most important, they focus on the decisions we make every day and, using entertaining examples, provide invaluable tips on avoiding the financial faux pas that can cost thousands of dollars each year.

"Intelligent and valuable....A large step toward educating consumers about their financial behavior and its causes.... Provides several financial rules."
Paula Throckmorton Zakaria, The Wall Street Journal

"This is a terrific book. Belsky and Gilovich tackle financial decisions from the inside out....sweeping away the psychological obstacles that stand in the way of our goals."
Beth Kobliner, author of Get a Financial Life

Gary BELSKY, winner of the Gerald Loeb Award for Distinguished Business and Financial Journalism, was a writter at Money magazine from 1991 to 1998 and a regular weekly commentator on CNN's Your Money. He lives in New York City and is currently a senior editor at ESPN : The Magazine.
Thomas GILOVICH is a professor of psychology at Cornell University and author of How We Know What Isn't So. He lives in Ithaca, New York.


Introduction

This is an optimistic book, written by a pair of realists. Optimistic, because this volume rests on the belief that ordinary individuals can enhance their enjoyment of life by understanding--and altering--the way they deal with their money. Realistic, because your authors know that correcting money-related behavior is a lot like tinkering with a golf swing or getting along better with in-laws : it may take a while, and for every remedy there's always the danger that you will create a whole new set of problems. Still, our purpose here is straightforward, and we are confident of its merits. We believe that by identifying the psychological causes behind many types of financial decisions, you can effectively change your behavior in ways that will ultimately put more money in your pocket and help you keep more of what you already have.

      How do we plan to conjure up this remarkable transformation ? The insights and strategies we offer arise from a variety of well-springs, not least among them our own experiences as a psychologist ans as a journalist specializing in personal finance. We're also spenders, savers, and investors much like yourself, possessing firsthand knowledge of the money mistakes we'll be discussing. Underpinning most of this book, however, is a field of research that has flourished on college campuses and in other intellectual arenas for the better part of three decades, but one that until now has never had a proper airing in the popular media. This area of inquiry is sometimes referred to as "behavioral finance", but we call it "behavioral economics". Behavioral economics combines the twin disciplines of psychology and economics to explain why and how people make seemingly irrational or illogical decisions when they spend, invest, save, and borrow money.

      Why, in other words, do smart people make big money mistakes ?

      As you're probably aware, confusion about money--how we earn it, how we spend it, how we waste it--may be more prevalent today than at any period in this country's history. From IRAs to 401(k)s to CMOs, most Americans are overwhelmed by the alphabet soup of financial information, lingo, and options that are now common to our daily existence. This deluge of new opportunities (and perils) has only added to the widespread befuddlement that has long plagued most of us when it comes to the choices we make at the car dealer, department store, or bank. Indeed, whether in the stock market, the real estate market, or the supermarket, we all commit financial follies that cost us hundreds or thousands of dollars every year. Yet in the main, we are blissfully ignorant of the causes of most of our monetary missteps and clueless as to how we might correct them.

  • Why, for example, do so many investors sell stocks just before the share prices skyrocket ? And why do those same investors keep a tight grip on lousy stocks until they plummet to the earth ?
  • Why do mutual fund investors put their money into the latest "hot" funds, when those same portfolios routinely lag behind the overall stock or bond markets ?
  • Why do so many Americans stash their money in passbook savings accounts or bank CDs when they're actually losing money by doing so ?
  • Why are so many of us willing to spend so much more for a product bought on credit than with cash ?
  • Why do business executives spend ever-increasing amounts of money on failing products or money-losing corporate divisions ?
  • Why are most workers happier with a 10 percent raise when the inflation rate is 12 percent than with a 3 percent raise when inflation is at 4 percent ? And why is that bad ?
  • Why do so many people have such low deductibles on their insurance policies ?

      The answers to these pervasive and puzzling questions can be found in behavioral economics. But before we throw you headfirst into this unusual science, allow us to take you on a quick tour of its history. By examining how economics came to be linked with psychology (in academia, that is; they've always been linked in real life), you'll be that much better prepared to grasp how behavioral economics can help improve your finances.


Sommaire

WHY SMART PEOPLE MAKE BIG MONEY MISTAKES 13
     An introduction to the new science of behavioral economics. 
 
Chapter 1: NOT ALL DOLLARS ARE CREATED EQUAL 31
     How "mental accounting" can help you save or cost you money. 
 
Chapter 2: WHEN SIX OF ONE ISN'T HALF A DOZEN OF THE OTHER 51
     How "loss aversion" and the "sunk cost fallacy" lead you to throw good money after bad. 
 
Chapter 3: THE DEVIL THAT YOU KNOW 81
     How the "status quo bias" and the "endowment effect" make financial choices difficult. 
 
Chapter 4: NUMBER NUMBNESS 105
     "Money illusion," "bigness bias," and other ways that ignorance about math and probabilities can hurt you. 
 
Chapter 5: ANCHORS AWEIGH 129
     Why "anchoring" and "confirmation bias" lead you to make important money decisions based on unimportant information. 
 
Chapter 6: THE EGO TRAP 151
     "Overconfidence" and the price of thinking that you know more than you do. 
 
Chapter 7: I HERD IT THROUGH THE GRAPEVINE 175
     "Information cascades" and the danger of relying too much on the financial moves of others. 
 
Conclusion: NOW WHAT ? 199
     Principles to ponder and steps to take. 
 
Postscript: PSYCHIC INCOME 213
 
     Acknowledgements.217

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