[This post is written and copyrighted by FIRE Finance (http://firefinance.blogspot.com).]
The winner has been announced and this contest has ended. Click here for current giveaways.
Oct 23, 2009: Welcome to our free giveaway on the eve of Halloween. Fun times are ahead and we decided to celebrate it with our great audience by giving away 3 copies of Jason Zweig's superb book "Your Money & Your Brain."This book sells at a list price of $26.00 and we shall be giving away three copies of this book (total value of $78). That means three winners and increased chances of winning. Get your entries in asap!
Coming back to Jason's book. It explores a different aspect of personal finance. It tackles the question "What happens inside our brains when we think about money?" Zweig, a veteran financial journalist, draws on the latest research in neuroeconomics, a fascinating new discipline that combines psychology, neuroscience and economics to better understand financial decision making. He shows why we often misunderstand risk and why we tend to be overconfident about our investment decisions. Jason also explains why smart people make stupid financial decisions and what they can do to avoid these mistakes.
In a nutshell this book is extremely entertaining and provides some fresh outlooks into the realm of personal finance and money. If you have ever been left thinking "How could I have been so stupid?" then you will benefit from this book.
Some examples (reprinted from the book with the author's permission) are:
Pursuit of Random Data
The pursuit of patterns in random data is a fundamental function of our brains. This often leads to pareidolia which means incorrect or distorted imagery. Often people sift through mountains of stock market data to find "predictable patterns" that might enable them to beat the market:- It became a common belief, based on historical numbers, that U.S. stocks tend to go up on Fridays and down on Mondays - but, in the 1990s, they did the exact opposite.
- October (the month of the 1987 market crash) is widely supposed to be the worst month to own stocks - but, over the long sweep of history, it has actually averaged the fifth-best returns of any month.
- Millions of investors believe in technical analysis, which supposedly predicts future prices on the basis of past prices, and in market timing, which purports to enable you to get out of stocks before they go down and back in before they go up. There is little, if any, objective evidence that either tactic works in the long run.
- Every year, many Wall Streeters root for National Football Conference teams to win the Super Bowl, based on the widely held and widely inaccurate belief that when teams originating in the old NFL take the championship, the stock market goes up the next year!
Another common syndrome is the jellybean syndrome or "denominator blindness."Every fraction looks like this: numerator / denominator
The impact of every investment you make can be expressed as:
dollar amount of your gain or loss / Total amount of your wealth
In this fundamental investing fraction, the numerator fluctuates constantly, and often widely, while the denominator varies much more gradually over time. For example, suppose you have a total net worth of $200,000 and that yesterday the market value of your stocks did not change at all.
If your stocks gain $1000 today, then the numerator of your fraction instantly shoots from 0 to 1000. The denominator, however, nudges slightly upward from $200000 to $201000. The leap from 0 to $1000 is exciting and vivid, while the movement from $200000 to $201000 is hardly noticeable at all.
But it is the denominator that matters; that is where the real money is. After all, the sum total of your wealth is a much more important number than the amount by which it rose or fell on any given day. Even so, many investors fixate on the numbers that change the most, overlooking the much larger amounts of money that are at stake overall.
Illusion of Control
To see how sensitive most of us are to the illusion of control, consider the following two bets:A. I will pick a name at random from the stock tables in the Wall Street Journal. You will guess whether this stock will go up or down tomorrow. If you're right, you win $10; if you're wrong, you lose $10.
B. I will pick a name at random from the stock tables in the Wall Street Journal. You will guess whether this stock will go up or down yesterday. (You are not allowed to look up the price.) If you're right, you win $10; if you're wrong, you lose $10.
Which bet do you like better?
In experiments at Stanford University, two-thirds of the participants took the first one. Most of these people were well aware that each bet has identical, 50/50 odds of winning.
But the first bet seems more comfortable, because it does not make you feel as if the result is out of your hands. An earlier study found that people would wager more money, and even be willing to accept worse odds, if they bet before, rather than after, a pair of dice was thrown."
This book is great fun. It goes on to explain the reasons behind such psychological behavior which affects our financial choices and consequently our wealth. We believe that money or wealth is a result of conscious choices that we make and how we successfully invest our skills and energies to those choices.
Give Away Rules
The winner will be announced on Sunday,November 1st, 2009.
To win this book, all you need to do is leave a short comment. Your comment # (generated automatically) will be your entry number.
Winner Notification: Since this site is hosted on Blogger, we need your email address to contact you for sending the book. You have three choices:
Limit one entry per person.
You do not need to have a blog to participate in this giveaway.
Deadline for posting a valid comment is now through midnight, Oct 31st (US - Eastern Standard Time), 2009.
- Leave your email address in your comment.
- If you are not comfortable about leaving your email address in your comment, kindly send an email to firegetters@gmail.com [firegetters at gmail dot com] with your email id. Please put the following in the subject line "FREE GiveAway".
- If you have a blog, and would like to be contacted through it, please leave its link in your comment.
Who is a winner?
We shall generate a two digit random number (http://random.org). The winner is the commenter whose comment # matches with the random number generated. Since we are giving away 3 copies we shall generate three random numbers with 2 digits in each.
- To maintain transparency the random numbers generated will be published.
- In case the winning entry is a comment from "Anonymous' with no email id or link to a site, we will run the random number generator once again to determine another winner.
- Once a winner is announced and we've contacted him/her, we expect a response within a week. Else we'll go through the process of selecting a new winner once again.
Please consider subscribing our RSS Feed (What is this?) to stay tuned to our site. Why? We are planning more giveaways with great, attractive and useful books, gizmos, and goodies. Good Luck to all!FIRE Finance reserves all rights to the rules of this contest.
Image Source(s): iStockPhoto
What Next?
- Leave a Comment
- Share this Post
More: You can read similar interesting articles in categories FeaturedPosts GiveAways
