How to Build Investment Strategies That Account for Investor Biases

Understanding how to use behavioral finance theory in investing
is a hot topic these days. Nobel laureate Daniel Kahneman has
described financial advising as a prescriptive activity whose main
objective should be to guide investors to make decisions that serve
their best interests. The reality? That's easier said than done. In
the Second Edition of Behavioral Finance and Wealth
Management, Michael Pompian takes a practical approach to the
growing science of behavioral finance, and puts it to use for real
investors. He applies knowledge of 20 of the most prominent
individual investor biases into "behaviorally-modified" asset
allocation decisions. Offering investors and financial advisors a
"self-help" book, Pompian shows how to create investment strategies
that leverage the latest cutting edge research into behavioral
biases of individual investors. This book:

• Shows investors and financial advisors how to either moderate
  or adapt to behavioral biases, in order to improve investment
  results and identifies "the best practical allocation" for
  investment portfolios. Using these two sound approaches for guiding
  investment decision-making, behavioral biases are incorporated into
  the portfolio management process


• Uses updated cases studies to show investors and financial
  advisors how an investor's behavior can be modified to improve
  investment decision-making


• Provides useable methods for creating behaviorally modified
  investment portfolios, which may help investors to reach their long
  term financial goals


• Heightens awareness of biases so that financial decisions and
  resulting economic outcomes are improved


• Offers advice on managing the effects of each bias in order to
  improve investment results

This Second Edition illustrates investors' behavioral
biases in detail and offers financial advisors and their clients
practical advice about how to apply the science of behavioral
finance to improve overall investment decision making.