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20/20 Money: See the Markets Clearly and Invest Better Than the Pros

ISBN: 978-0-470-49372-4
304 pages
April 2009
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Description

20/20 Money: See the Markets Clearly and Invest Better Than the Pros

To be a more successful investor, you need to see the investment landscape more clearly. 20/20 Money—from Fisher Investments Press—can help you achieve this goal.

Designed to help you think differently about your investing choices, this reliable resource addresses new ideas and challenges widely held conventions. With 20/20 Money as your guide, you'll quickly learn how gaining a firm understanding of various concepts—from stock market and systems theory to neuroscience and psychology—can help you begin making better investment decisions. Along the way, you'll also discover some of the most successful strategies for thinking and learning, and how they can be applied to your investing endeavors.

To become a better investor, you have to have the discipline to make tough choices—choices that may not always be in line with tradition or commonly accepted invested wisdom. But the approach outlined throughout these pages can help you gain the vision to begin making better-informed investment decisions.

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Table of Contents

Acknowledgments xi

Introduction xiii

Chapter 1 Investing Is a Science 1

Apollo's Arrow Shot Crooked 2

Dionysus—More Than Just a Good Vintner 3

Use the Method, Not the Dogma 5

Careful with Categories 13

Could Math Be Wrong? 15

Reduction: Why You Can't Quantify Everything 19

Chapter 2 Investing Is a Discipline 27

Discipline, Discipline, Discipline 29

Sagacity: Seeing Isn't Believing 41

Understanding and Being Curious 48

Chapter 3 Human Behavior 51

Brain Basics 53

Brains on the Market 64

My, What a Terrible Memory You Have! 71

Bad Behavioral Finance 76

Behavioral Miscellany 79

Chapter 4 Sentiment and the Media 83

Sentiment Basics 85

News and the Media 90

What's Their Motive? 98

Tips and Tricks to Navigate the Media 100

Metaphors We Invest by 106

Chapter 5 How Stock Markets Really Work 113

Capitalism by Any Other Name 114

It's Complicated . . . A Crash Course in CEAS 118

The New Golden Rule 130

Oldest and Still the Best: Supply and Demand 139

Chapter 6 Forecasting, Part 1—The Principle of Probability 147

Forecasting Is Strange Alchemy 148

Types of Predictions 150

Probability Theory, or How Markets Are Nothing Like Coin Tosses 154

The Biggest Problem of Them All 163

Investing Lessons from Probability 165

Looking Ahead . . . 170

Chapter 7 Forecasting, Part 2 —Recognizing Patterns 173

A Pattern by Any Other Name 174

Stock Market Patterns 175

Patterns Through the Noise 179

It's a Game of Relative Expectations 181

Back to the Future: Using History to Find Patterns 187

Three Big Drivers 191

An Optimistic Note on Future Patterns 195

Chapter 8 Practical Portfolio Management 197

The Virtues of Heuristics 198

Goal Setting 199

Personal Goals 201

Portfolio Goals 205

The Top-Down Philosophy 210

Miscellaneous Heuristics 223

Chapter 9 The Nature of Risk and Navigating Markets in Troubled Times 229

Risk and Uncertainty 231

Financial Risk, or What Happens When You Assume 233

In Troubled Times 239

Parting Thoughts 253

Notes 255

Selected Bibliography and Further Reading 259

About the Author 269

Index 271

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Author Information

Michael J. Hanson has been an investment banker as well as a stock analyst and is currently a senior editor and recurring columnist at Fisher Investments' MarketMinder.com. He has lectured on topics in money management at the Haas School of Business at the University of California, Berkeley, and speaks regularly throughout the country on a variety of topics, including capital markets and behavioral finance.
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