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NeuroInvesting: Build a New Investing Brain

ISBN: 978-1-118-33921-3
256 pages
October 2013
NeuroInvesting: Build a New Investing Brain (1118339215) cover image

Description

Rewire your brain for investing success

As an investment advisor to high net worth individuals, Wai-Yee Chen has spent years watching her clients make investment decisions—some good decisions and some not-so-good decisions. Though confronted by the same market variables, those clients often make very different choices with very different results. Here, Chen argues that it's usually not the data that affects investor decision-making as much as the way investors themselves think. In NeuroInvesting, Chen argues that investors can change the way they think in order to change the way they invest. She presents four elements that affect investor decision-making and reveals how investors can rewire their brains to make better investing decisions for better returns.

  • Uses neuroscience to explain how successful investors think different
  • Written by an experienced investment advisor who works at one of Australia's premier retail brokers
  • Explains investing using real-world stories about investors from an advisor's perspective

When it comes to investing, how you think has a huge impact on how you make investing decisions. Based on the real science of how people think, NeuroInvesting offers every investor a chance to change the way they invest by changing the way they think.

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Table of Contents

Foreword ix

Preface xi

Acknowledgments xv

About the Author xvii

Part I Being at Ease 1

Chapter 1 Money and Me 3

My Money Personality 4

The Big Five Personality Traits 13

Money and Me 16

Notes 17

Part II The Tension Caused by Impulsiveness 19

Chapter 2 Thrills, Ego, and Impulse: Is It Bad? Is It Me? 21

What Is Impulsiveness? 21

What about Impulse? 26

Keeping Impulse and Impulsiveness at Tension 34

The Impulse Meter 36

Notes 37

Chapter 3 Impulsiveness and Our Brain: Dopamine and the Reward Network 39

Impulsiveness and Dopamine 39

Dopamine Neurons 40

Dopamine and the Trader 41

Dopamine Withdrawal Symptoms 42

Novelty-Seeking Gene? 44

Dopamine’s Engine Room and Neuronetwork 45

Notes 49

Chapter 4 Beating Impulsiveness 51

Taut and Alert 51

The Effect of Serotonin 52

The Right Brain Comes to the Rescue 55

Engaging the Rational Brain 57

Setting Rules and Sticking to Them 60

Emotional Pain and Fear 63

In Conflict 66

Brain Loop 67

Be Open 69

Play Your Own Game 71

Notes 71

Part III The Tension of Fear73

Chapter 5 How Did Fear Get Here? Expectations, Letdowns, and Anxiety 75

A Big Expectation 75

A Clean Slate? 77

Prevalent Fears 78

Personal Fears 88

Notes 99

Chapter 6 Are Fears Bad? Fear Takes the Role You Give It 101

Passing Up Good, Profitable Opportunities 101

Buying at the Top 102

Buying Products with High Yields 103

Counterproductive Trading 105

Unnecessary Protections 106

Fear Incapacitates 107

Inability to Accept Losses 110

Fear Causes Brain Freeze 111

The Costs of Fear 112

Notes 113

Chapter 7 Reacquaint Yourself with Fear: Been Burnt, Done That 115

The Pandora’s Box of Fear 115

The Engine Room of Fear 116

The Process of Fear 118

The Making of Fear Memories 118

How Real Are Memories? 119

Recreating Trading Memories 122

Other Fear Management Techniques 126

Notes 131

Part IV Instincts Held in Tension 133

Chapter 8 Emotions and Beliefs: Who Is in Control? What Is Real? 135

Emotions 135

What Are Emotions? 136

The Emotional Neuronetwork 137

Value of Emotions 138

Emotional Expression of Goals 141

Our Beliefs: The Unspoken Goal 144

Instinct Encapsulates All 148

Notes 149

Chapter 9 Expressions of Instincts: Are Your Instincts Undervalued? 151

A Culture of Anti-Instinct 151

Your Instinct Awaits 153

Expressing Instincts 154

The Emotional Brain and Instincts 155

Instincts in Trading 156

From Instincts to Mimicry 158

Mirror Neurons in Trading 160

The Workings of Mirror Neurons 161

Practice Instincts 162

Avoid Instinct Killers 162

Avoiding Anti-Instincts 173

Notes 174

Chapter 10 Nurturing Your Skills in NeuroInvesting: What Is Your Mental Personality? 177

How to Be an Excellent Instinctual Investor 177

NeuroInvesting Is a Journey 186

Notes 187

Chapter 11 Summary of the 12 NeuroInvesting Trading Strategies 189

Appendix A Big Five Inventory Questionnaire (Adapted) 191

Appendix B Barratt Impulsiveness Scale (Revised) 197

Appendix C T he Maudsley Medical Questionnaire 201

Appendix D Word Connection List 203

Appendix E Body Perception Questionnaire 205

Index 213

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Author Information

Wai-Yee Chen, CPA, MAppFin, is an investment adviser and professional portfolio manager who specializes in the use of options in growing, protecting, and income-enhancing investment portfolios of her high-net-worth clients.

Wai-Yee's more than seventeen years' experience in trading and advising clients in mostly equities and derivatives gives her a unique perspective into how investors' own personality, psychology, and behavioral traits affect their investing style and returns. Her market insights and investment ideas are regularly sought after by investment magazines, journals, and TV channels CNBC and Sky Business, and she is a coach to fellow advisers and investors.

Wai-Yee's skillfulness in drawing on the sensitivities of neuroscience, psychology, and philosophy of investing, combined with her knowledge of the fast and dynamic worlds of derivatives and stocks, makes her both a swift and considered investor/adviser.

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Press Release

August 22, 2013
What Causes People to Make All the Wrong Investment Decisions?

Author Wai-Yee Chen Explains How to Rewire Your Brain for Better Returns and Invest At Ease

Surveys (from Global Investor Sentiment) reveal many investors are optimistic towards the 2013 market outlook, yet current individual investor's risk aversion trend is shifting to more conservative strategies to avoid potential loses. Is this strategy safe or are they missing the bigger picture?

One financial expert notes in order to achieve consistently better returns, greater tranquility and peace of mind, one needs to build a new investing brain. Author Wai-Yee Chen shares her latest findings in neuroscience and cognitive psychology, as well as years of experience as a professional investment adviser in her new book, Neuroinvesting: Build a New Investing Brain (Wiley; July 2013; ISBN: 978-1-118-33921-3).

In Neuroinvesting, Chen reveals the emotional brain is one of the most under-valued assets waiting to be nurtured for creating a long term value. “It's not just the cognitive brain that is deciding, there is another final arbiter lurking… our emotional brain, embedded with our subconscious goals, desires and beliefs,” Chen said.

With careful explanation, Chen shows how to balance the tensions that investors experience from impulsiveness, fear and instincts. She then provides strategies and techniques for helping readers assert greater conscious control over their innate and learned behaviors in order to win.

As Dr. Van K. Tharp, bestselling author of Trade Your Way to Financial Freedom, writes in the book's Foreword, "You never really trade the markets; you trade your beliefs about the markets."

Neuroinvesting opens the Pandora box to our emotional brain and guides readers to a fascinating journey inside the human mind. It explores the complex dance of reason and emotion, logic and impulse, fear and aggression, the instinct to survive and the desire for status that informs people’s investment decision-making process.

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