That may sound easy, at least till you read this quote of Ambrose Bierce the book opens with: ‘Brain, n. An apparatus with which we think that we think.’ Economists have long insisted that investors know what they want, understand the trade-off between risk and reward, and use information logically to pursue their goals, explains Zweig. “In practice, however, those assumptions often turn out to be dead wrong.”

Before you despair, he reassures that you’re not alone. “Investors habitually are their own worst enemies, even when they know better.” That is because “our investing brains often drive us to do things that make no logical sense – but make perfect emotional sense.” Citing Malcolm Gladwell’s ‘Blink’, which suggests that ‘decisions made very quickly can be every bit as good as decisions made cautiously and deliberately’, Zweig alerts you about the pitfalls of applying ‘blink’ insight to investing.

“Our intuitions about our intuitions can be misleading,” warns Zweig. “Among the most painful of the stock market’s many ironies is this: One of the clearest signals that you are wrong about an investment is having a hunch that you’re right about it. Often, the more convinced you are that your hunch will pay off big, the more money you are likely to lose.”

In the madhouse of financial markets, the only rule that appears to apply is Murphy’s Law, finds Zweig. “And even that guideline comes with a devilish twist: Whatever can go wrong will go wrong, but only when you least expect it to.” If all you do is ‘blink,’ your investing results will stink, the author advises. “The best financial decisions draw on the dual strengths of your investing brain: intuition and analysis, feeling and thinking.”

Worth taking a day off from trading, to read this!

Options are an exciting part of the investment arena, where you can be successful provided you adopt a consistent and disciplined strategy, guide Nicholas and Barbara Apostolou in ‘Keys to Investing in Options and Futures’, fourth edition (Westland).

The first rule they prescribe is, ‘Make it simple’. Rather than adopting complicated strategies that are too difficult to understand, focus upon a few of the more widely used ones. The second rule, a seemingly obvious one, is: ‘Be safe.’ Means, never risk more than you can afford. “Do not exclusively buy short-term calls or puts, betting on explosive moves up or down. The tactic will lose money sooner or later.”

Rule 3 is to choose a reasonable expiration period. Avoid options with more than six months to expiration, and also the ones with only a few weeks’ life left. “The general rule on premium decay is that 75 per cent of the premium will evaporate in the last three weeks of an option’s life span. Therefore, when buying options, buy time.”

Suggested starter material.

Investing is both an art and science, it is said. But how about investing in art? In 2005, when shares gave a return of 47 per cent and gold, about 25 per cent, high-end art gave no less than 150 per cent, informs ‘Everything you wanted to know about Investing’ from Kotak and CNBC-TV18.

“Like in the stock markets where mid-caps can outperform large caps, in the art market, the work of junior artists could fetch higher returns as they may be bought for a cheaper price.” Again, as with investing, you need knowledge about art, especially if you are buying art directly. “Invest only those art pieces that have been historically proven.”

Instead, you may invest through a fund. The total size of the domestic art market is estimated to be around Rs 1,000 crore, states a recent article about art funds, on www.moneycontrol.com .

Currently, there are a few art funds in India, but there are no laws or regulations governing the operations of the schemes and investments in the art market in India, notes the book. “Therefore, do your homework. Find out about the fund’s background and invest only in reputed funds.”

For easy reference.

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