Book Review: The Behavioral Investor by Daniel Crosby
A good book for those looking to work through their emotions
I first heard about this book several years ago but never got around to reading it. Then I caught Daniel on the Value Stock Geek podcast and figured it was finally time to dive in—and I’m glad I did.
Even as someone approaching two decades in the markets, I still find value in reading fresh perspectives on how to navigate the emotional ups and downs of investing.
📖Some Notes/Quotes from the book
On due diligence:
In-person meetings with management, despite seeming like common sense, are often expensive boondoggles. They can give fund managers a false sense of confidence while increasing sunk costs.
Becoming a smarter consumer of investment media:
The book offers a useful checklist for evaluating financial content:
Evaluate the source
Question the melodrama
Examine the tone
Consider the motive
Check the facts
Just because information is more available than ever doesn’t mean it’s valuable.
Emotional discipline matters:
We all know the rules for becoming better investors—we just tend to ignore them in the heat of the moment.
People who can tune out their emotions tend to perform better.
When faced with tough decisions, many people default to doing nothing. It’s often easier to regret inaction than risk being wrong by acting.
Those risk questionnaires from financial planners? Not very predictive. Saying how you’ll respond to a 20% drawdown rarely matches how you’ll actually respond when it happens.
Interesting cognitive biases covered in the book:
Attitude polarization: Writing out pros and cons can actually make us cling harder to our original beliefs.
Sophistication effect: The more knowledgeable we are, the more convincing (and potentially misleading) we can be—to both ourselves and others.
The RAIN Method
The book introduces a technique for slowing down when you feel the urge to deviate from your investment system:
Recognition – Notice what’s happening in your mind and body.
Acceptance – Allow your feelings and thoughts to exist without trying to push them away.
Investigation – Ask why you’re feeling this way. What stories are you telling yourself?
Non-identification – Remember: you are not your thoughts or feelings. You can experience them without acting on them.
🧠Closing Thoughts
I have added this to my list of books for beginner investors. Personally, I think all of us could use a little more books that get us to slow down and examine why we think the way we do.
Have you read this book? What did you think about it? I would love to hear your thoughts.
Thanks for reading my work.
Dean