PostHeaderIcon Understand How Markets Really Work

Outsmarting the Smart Money: Understand How Markets Really Work and Win the Wealth Game

How to invest using straightforward common sense instead of misleading”hot tips”

While market pundits argue the rational market theory, one theory gets almost universal consensus­­that of the irrational investor. Outsmarting the Smart Money outlines where most investors go wrong and explains how to instead approach the markets with intelligence and calm. Filled with hard-hitting insights and useful lessons, it shows how to use market-proven techniques and strategies to overcome biases, myths, and mistakes­­and beat the pros at their own game. Cunningham presents flexible security analysis guidelines for investors who want to guide their own portfolios, but don't want to devote all of their free time to the effort including:

  • How to overcome personal biases, misleading information, and market inefficiencies
  • Methods to avoid being cheated by money managers, and identify “spin” reporting

Rating: (out of 9 reviews)

List Price: $ 29.95

Price: $ 12.97



5 Responses to “Understand How Markets Really Work”

  • Anonymous says:

    Review by for Outsmarting the Smart Money : Understand How Markets Really Work and Win the Wealth Game
    Rating:
    I read Cunningham’s book based on the review in Barron’s rounding up the best investment books of 2002. They were right. The book is a eye-opening intro to the psychology of investing, important to investors and market observers/regulators. (Cunningham’s other books have more of the basics for investors–also very good books.)

  • dennis wentraub says:

    Review by dennis wentraub for Outsmarting the Smart Money : Understand How Markets Really Work and Win the Wealth Game
    Rating:
    In a perfect investment world the price of a stock embodies its value. And those who believe this ‘efficient’ market hypothesis will be buying index mutual funds certainly not this book. But those who dismiss this academic construct to profit from the inefficiencies evident in the market still run substantial risks not adequately addressed by most investment books. The minefield of risks that Cunningham guides us through is that the biases of others, the cause of those price vs. value anomalies, are also our own biases and can trigger money-losing investment decisions. Overconfidence and the “pattern seeking” bias to project short term trends into the future are just two examples, but they do so some of the worst damage. They lead to a dangerous reliance on margin borrowing and excessive trading activity. Also, recognize that companies make many of the same behavioral errors. It is the author’s “smart” investor who can spot the folly of manic acquisitions by companies acting as if they were on steroids – grasping for growth at a fiscal cost. Cunningham dismisses technical analysis as “hokum” (Here he agrees with the proponents of an efficient market who maintain market movements cannot be predicted accurately). Stay away from IPO’s, companies relying on pro-forma accounting, and sector funds. Read analyst reports with caution, but do study closely “management’s discussion” of their business in the annual report. Be wary of stock buybacks, stock option programs, stock splits, spin-offs, secondary offerings, and performance-based incentive plans. Any of these programs can be abused and rise out of corporate hubris. Above all: Recognize your biases, your tolerance for risk, be objective, and have criteria to know when to sell your positions. A lot of territory is covered in this book with some of the best material appearing in Chapters 10 and 11. Cunningham builds a persuasive case for adopting a long term, value oriented investment philosophy which is least affected by these biases.

  • Bobby Buckmaster says:

    Review by Bobby Buckmaster for Outsmarting the Smart Money : Understand How Markets Really Work and Win the Wealth Game
    Rating:
    Makes you think. Straightforward points as to investing slip ups I’ve made and some I now know I better be on the look out for. The chapter on “Living with Emotions” is worth the price alone. It is the whole package–key points of dealing with our conflicting goals of (a) generating high returns and (b) sleeping well at night. I feel I’ll be better able to do both, having read this delightful read.

  • Anonymous says:

    Review by for Outsmarting the Smart Money : Understand How Markets Really Work and Win the Wealth Game
    Rating:
    What a great book! I am learning much. It is the starting point for understanding value investing. The section on the Austrian school of economics is big news. It places Hayek (“Road to Serfdom”) in a historical context and shows the links between Hayek and the Austrians on the one hand and Graham and Fisher and their disciples on the other. Reading about the Austrian School and their theories of behavioral economics also shows links to current research into “complex adaptive systems” and “chaos theory” (subjects addressed in Cunningham’s other books). None of these schools believes in the concept of “market equilibrium,” which seems to be a pillar in the “efficient market theory”– the price of a stock equals the value of a stock. The enormous implications of these points for investors-from selecting stocks to building a portfolio-round out this powerful book.

  • Anonymous says:

    Review by for Outsmarting the Smart Money : Understand How Markets Really Work and Win the Wealth Game
    Rating:
    Awesome. Cunningham dissects the woes besetting corporate American using lucid, concrete examples, with boundless energy and enthusiasm, endorsed properly on the back cover by those who take behavioralism seriously, including Gary Belsky, who wrote the top-seller “Why Smart People Make Big Money Mistakes” (which is about general habits, not investment philosophy of which Cunningham writes) and Robert Hagstrom, prolific author (who writes about investment philosophy, and sometimes behavioralism). What an astonishing record Cunningham has developed as a writer and expert in invesetment theory and practice! A better title for this book would be Rational Investing in a Hair Brained Environment; the one chosen is unduly flashy for the seriousness of Cunningham’s pursuits (he’s a professor of law and business!).

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