Investment Mistakes Even Smart Investors Make – Part 1 of 3
As a high school teacher, I’ve done plenty of reading on educational theory.
How do kids learn, and how can you make it stick? If given free reign, I’d like to teach a humanities class with Larry Swedroe and RC Balaban’s latest book, Investment Mistakes Even Smart Investors Make as my core text.
With it, I believe I could blend lessons in psychology, history, literature, mathematics, marketing/business, the stock market and investing. Best of all, the lessons would all have applicable benefits to the kids, years after they leave the classroom.
Sound like a tall order?
I don’t think it is. And I believe any teacher could do it.
School subjects have been taught in isolation for far too long. We teach history, isolated from English, isolated from math. Little crossover occurs in the world of academia, and (although I’m embarrassed to admit it) much of what we teach in schools isn’t practical.
With a full year course devoted to a multi-disciplined approach, this book could serve a cross curricular purpose that I doubt even the authors dreamed possible.
Swedroe and Balaban’s work takes readers through 77 mistakes that investors often make with their money.
Psychology and Biology—without Freud
As a college student, I took two psychology classes, hoping to learn what motivated people, how to influence others and simply, what made us tick. But I learned nothing practical.
Using Swedroe and Balaban’s book as a launching pad, we could make psychology real–even profitable, and we wouldn’t have to teach it in isolation.
As Swedroe and Balaban point out in their book’s first lesson, people tend to be overconfident when making investment decisions, yet there’s a slight difference between the sexes: Women investors typically outperform male investors. And married male investors typically outperform single male investors.
Simply, men are overconfident and more volatile when it comes to making decisions. They trade more frequently, and have a higher likelihood of imploding their investment accounts… and their cars, on the open road.
This leads nicely to biology, and testosterone.
What is testosterone and what are the behavioural side effects of it when injected into athletes? How do testosterone levels affect men and women differently, behaviourally and biologically? With a single lesson/project we can grab the budding biologist, the aspiring athlete, the psychologist, and the kid who has just decided that he or she wants to make bucket loads of money.
These are questions that students could research and present projects on, based on their areas of interest. And in each case, they would link it to behavioural finance: how psychology affects investment decisions.
You don’t have to be a high school student to benefit from Investment Mistakes Even Smart Investors Make. This is one of the richest, most focused money books I’ve ever read.
And I plan to write two more articles about it, linking its merit to a broader educational platform.
If you haven’t read this book yet, order it through Amazon. Filled with incredible details and academic evidence, it’s something every investor can benefit from.
If you’ve read my book, Millionaire Teacher, please read Swedroe and Balaban’s book next. These gentlemen take the same themes to another level. Its depth will impress you.
—–Balaban and Swedroe both work for the Buckingham Family of Financial Services; you can also read Larry’s blog at CBS MoneyWatch.