Henriette PrastBiographyHenriette Prast is a researcher at the Nederlandsche Bank (Dutch Central Bank), Section Banking and Supervisory Strategies, and teaches Master Courses in Money, Credit and Banking and in Behavioural Finance at the Amsterdam graduate Business School of the University of Amsterdam.She has published on a large range of subjects including central banking, inflation and unemployment, financial sector regulation and stability, deposit insurance, behavioural finance and the role of psychology in economics. She is a specialist in Emotionomics, a term she has coined to describe the area of research that concentrates on the role of emotions in economics. She writes a weekly column on Emotionomics in the Dutch financial newspaper Het Financieele Dagblad and has published various books on the subject. Other papers or Journals Henreitte has been involved in: Newspaper: het Financieele Dagblad; Magazines: Wilmott Magazine (Wiley Publishers; Banking Review) Book Recommendations
Investing RulesTake control of your own investments. Keep in mind that fund managers and investment analysts aim to maximise not your return, but their own future income, which depends on their reputation for being smart. Keynes observed that: 'It is better for reputation to fail conventionally than to succeed unconventionally'. By disappearing in the crowd, professionals make sure that their mistakes will be forgiven, as others made the same faults. This mediocrity preserves their reputation, but does not enhance your return. Don't be conventional. A corollary of the first rule - since you should be more concerned with returns than reputation - is to avoid convention. Keynes' observation may have been right for financial industry participants, but only for those with mediocre talents - and not for readers of this book! Blame your faults on yourself, not others. "Heads I win, tails it's chance." Blaming someone else for your mistakes, and claiming the honour for your successes may seem pleasant, but it does not make you either good company or a good investor. Moreover, you won't learn from past investment mistakes. Cognitive psychologists have labelled this behaviour 'biased self-attribution'. It leads to another empirically verified phenomenon: individuals are, on average, overconfident. If you are overconfident, you trade too much, as you think you are smart enough to see valuable information in what is actually irrelevant news. The excessive trading lowers your return, as transaction costs exceed the return from trading. Taken from The Global-Investor Book of Investing Rules |
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