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The Emotionally Intelligent Investor: How Self-Awareness, Empathy and Intuition Drive Performance

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The Emotionally Intelligent Investor challenges several long-held assumptions and beliefs, by asserting that a good investment approach starts with introspection. Too many investment gurus tell you to emulate their techniques despite the fact that you may have very different personality traits, motivations and biases. Would Shaquille O'Neal tell a short basketball player to play like him? This book provides a unique template for self-reflection and a framework for developing an investment approach that works best with who you are.

Whereas the consensus opinion is that investing success comes from blocking out emotions and making purely rational decisions, the best money managers actually use their feelings. They actively sense what others in the market are thinking, and they employ gut instincts when making decisions. Nevertheless, virtually all investing text books neglect to mention how to best cultivate and utilize empathetic and intuitive realizations.

In this book you will learn a process for developing an investing advantage by putting yourself in someone else's shoes. You will also discover how a stock chart is a great tool for understanding what the current holders of a security may be feeling, and you will appreciate why technical analysis works.

This book demystifies intuition with respect to investing and provides a method for building and safely harnessing helpful gut instincts. Traditional security analysis is vital, but in this book you will learn why superior returns primarily depend on self-awareness, empathy and intuition. The book is complete with examples and recommendations that illuminate a path towards reaching full investing potential.

212 pages, Kindle Edition

First published August 24, 2012

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Ravee Mehta

2 books5 followers

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Displaying 1 - 7 of 7 reviews
Profile Image for Rhythm Gupta.
34 reviews
April 24, 2020
Superb analysis on what it takes to improve on the overall journey of investments
Profile Image for Suresh Ramaswamy.
110 reviews4 followers
March 30, 2019
The old English saying “Imitation is the best form of flattery” is more or less accepted. Many self-help and personality gurus recommend that imitating the successful people’s style of functioning would lead us to success.

In the investment world, the most successful and richest giant undoubtedly is Warren Buffet. Following the above adage, to be a successful investor, I should just imitate Warren Buffet’s style of investing and I am home – right – the author Ravee Mehta begs to differ.

“The Emotionally Intelligent Investor” challenges several long-held assumptions and beliefs, by asserting that a good investment approach starts with introspection. Emulating the techniques of successful gurus may lead to success but it is just dumb luck and not skill. The book provides a unique template for self-reflection and a framework for developing an investment approach that works best with who you are.

Whereas the consensus opinion is that investing success comes from blocking out emotions and making purely rational decisions, the best money managers actually use their feelings. They actively sense what others in the market are thinking, and they employ gut instincts when making decisions.

A handy book of less than 200 pages with easy to read font, the 14 chapters on investing flows smoothly and easily. Divided into three parts – part 1 ‘Self Awareness’, Part 2 ‘Social Awareness’, Part 3 ‘Intuition’ – the book suggests ways and procedures to improve one’s skills in investing. Mehta suggests that investing is more of an art than science, even though there are rules to be followed and practices adopted to get the best results.

The investing styles of various successful legendary investors – Warren Buffet, George Soros, Stanley Druckenmiller, David Brooks of Greenlight Capital, Charlie Munger, David Einhorn, Bill Gross, Carl Icahn and others – are described in short snippets at the appropriate places.

At the end of the book in pages 180 to 182, the author summarizes as follows:

“If you only learn to things from reading this book, let it be these takeaways:

1) Investing success does NOT come from ignoring or suppressing emotion. Assuming that you have relevant expertise, disregarding intuition and empathetic feelings because they cannot be explained, is a mistake!

2) Self awareness is the first and most important step in improving as an investor. An investment approach needs to fit with your unique set of motivations, personality traits, weaknesses and strengths. Don’t try to be exactly like Warren Buffet if you are not like him!

3) Humans have certain common investing vulnerabilities, but everybody is unique in their susceptibility to them. Consider your weaknesses to be investing biases and traps to which you are most prone.

4) Because we are constantly changing, introspection should be incorporated into the daily and weekly routines of any investor. Try writing in a trading journal every day.

5) An investing style that involves riding trends can require very different personality traits and competencies than a more contrarian investment strategy. It is important to make sure an investment’s thesis matches the approach. For example don’t use valuation as a justification for an investment in a stock that has been performing well for some time. Likewise, don’t get shaken out of a contrarian bet just because short term business conditions are slightly worse than expected.

6) Trading success involves recognizing and taking advantage of the mistakes of others. This requires empathy.

7) Technical analysis is a tool for empathizing with the current shareholders of an investment. Investors that completely ignore stock charts are potentially missing out. However avoid getting caught in the weeds of chart reading without thinking about what the chart is telling you regarding how other shareholders are feeling.

8) Management teams of the companies we invest in should be self aware and trustworthy. They are making investments everyday with our money.

9) Intuition is not a magical sixth sense. It is based on pattern recognition. Within an overall market that can seem quite random, there are many patterns that over and over again. The expert investor is good at quickly spotting these patterns developing. Fundamental analysis is very important, but good decision should start with intuition and should then be safeguarded with logic. Every potential investment should remind you of something that was successful where luck was not a major factor.

10) Intuition is best built through objectively reviewing previous decisions. It is important to make this a continuous process, since investing intuitions can become obsolete. Gut instincts can also be developed through mental simulation exercises. Instead of simply listing risk factors, try to visualize failure and then work backward to understand patterns that help with sensing danger. Mental simulations can also help with portfolio construction and are a useful way to leverage the intuitions of others.”

After reading the book, the reader / investor learns why superior returns primarily depend on self awareness, empathy and intuition, rather than technical analysis and financial ratios, which are essential, but secondary to the three above mentioned requirements. This is not to write off technical analysis, financial ratios and corporate presentations without which the qualities of self awareness, empathy and intuition standing alone can give no results.

My personal take is this book is more helpful to the professional full time investor rather than the lay investor who invests part time and is engaged in some other vocation. However, they too can benefit, but to a lesser extent and reap the benefits of superior returns.

An excellent compendium and a must read for all investors, if they want superior returns.
345 reviews3,044 followers
August 21, 2018
After reading the first chapters I thought “oh no, it’s just another book listing behavioural biases”. It’s not. This book combines two related genres, down to earth trading psychology books and the more academic texts on behavioural finance. On top, a good sprinkle of the authors and his mentor’s experiences is added. Ravee Mehta has worked as an asset manager for two multibillion dollar hedge funds - Karsch Capital and Soros Fund Management as well as being an analyst for the investment bank Donaldson, Jufkin & Jenrette. However, in the midst of his career he took a step back to reflect. After studies in philosophy at Oxford, Mehta returned to the financial markets to invest his own money.

The purpose of the book was to help the author to become a better investor when returning to the markets. I always feel privileged to take part of investors’ self-improvement projects. As such it’s a very practical book on decision making with numerous advices on self-improvement and how to craft organizations and processes to handle the psychological aspects of investing. The main point of the book is that people, and superior investors for that matter, are all different and to become a successful investor you need both self-awareness and to choose an investment strategy that fits your personality. Hardly a new topic but the book is full of useful elaborations. The other underlying topic consists of methods to utilize social awareness, empathy and intuition to make better investments. I find it sympathetic that Mehta himself uses a combination of momentum and value investing. I’m not sure it would suit that many to combine these strategies but as an author it gives Mehta a broader understanding, where many writers only present half the picture. To be honest however, and understandably given the previous employers, Mehta leans towards trading psychology with its focus on intuition and gut feelings. This shouldn’t discourage long term investors from reading the book.

In short the author’s key takeaways are: 1) “Investing success does not come from ignoring or suppressing emotion”, 2) “Self-awareness is the first and most important step in improving as an investor”, 3) “Humans have certain common investing vulnerabilities, but everybody is unique in their susceptibility to them”, 4) “Because we are constantly changing, introspection should be incorporated into the daily and weekly routines of any investor”, 5) “An investing style that involves riding trends can require very different personality traits and competencies than a more contrarian investment strategy”, 6) “Trading success involves recognizing and taking advantage of the mistakes of others. This requires empathy”, 7) “Technical analysis is a tool for empathizing with the current shareholders of an investment”, 8) “Management teams of the companies we invest in should be self-aware and trustworthy”, 9) Intuition is not a magical sixth sense. It is based on pattern recognition” and 10) “Intuition is best built through objectively reviewing prior decisions”. All excellent advice and there is more where that came from.

With regards to understanding and developing your own ability for self-awareness and social awareness the author gives the reader relatively little help but instead directs him to other books or websites. This is okay, but to some extent it leaves the reader with a lot of advice on what he should do but not really on how to actually pull it off. In later revised editions Mehta might consider adding more of this self-analytical material. It would make the book more complete.
In investing feelings shouldn’t be kept in check, they should be analysed, understood and used. Next week I will make a new attempt to start to write a weekly trading dairy. I promise, I’ve even bought the note pad to write in. Or rather, I got it from Credit Suisse...
18 reviews4 followers
February 27, 2018
Underrated book. Its a short quick read. One of the few books that delves into the role of intuition in investment decision making and is able to make a good case for why a fundamental investor needs to have at least a basic understanding of technical analysis to develop a variant perception.

Profile Image for Psocial.
16 reviews
June 11, 2023
Psychological approach

First of all, thank you Mehta for giving me the opportunity to go through your thoughts and experiences which I strongly believe will help me in my investing career.
Intuition, gut instinct, validities.

Awesome read.
Profile Image for Dev.
7 reviews10 followers
April 22, 2016
Ravee Mehta writes about topics that are very important but not addressed often. Like the title suggests, Mehta describes how emotions guide many of our decisions. Specifically he explains why self awareness, empathy and intuition are important to include in your check list while making trading/investing decisions.

I think this book is not really for individuals wishing to invest/trade their savings. Professional investors/money managers could benefit from this book by understanding themselves better, and by spending more time contemplating their nature and decisions.

I highly recommend this book.
334 reviews15 followers
April 3, 2014
The book came highly recommended. And it's a good book for anyone on the buyside; talks about a topic that most books dont cover - the emotional aspect of investing in the markets, and the need for patience and introspection.
Got a little too dragging towards the end, but a decent read overall.
Displaying 1 - 7 of 7 reviews

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