James Montier: Listen to those who don't agree with you

James Montier, Global Strategist with SocGen in London, is renown for his expertise in the field of behavioural finance. In fact, he has written the books, Behavioural Finance: A User's Guide , then, Behavioural Investing: A Practitioners Guide to Applying Behavioural Finance (The Wiley Finance Series) . When he was at Dresdner Kleinwort Wasserstein, in 2002, he penned a classic report titled, Part Man, Part Monkey. Its a timeless piece about common mental investment pitfalls, with long shelf life. Here is the synopsis from the front page of this classic:

Leaving the trees could have been our first mistake. Our minds are suited for solving problems related to our survival, rather than being optimized for investment decisions. We all make mistakes when we make decisions. The list below gives a top ten list for avoiding the most common investment mental pitfalls.•

1. You know less than you think you do.
2. •Be less certain in your views, aim for timid forecasts and bold choices.
3. •Don'�’t get hung up on one technique, tool, approach or view - flexibility and pragmatism are the order of the day.
4. •Listen to those who don'�’t agree with you.
5. •You didn'�’t know it all along, you just think you did.
6. •Forget relative valuation, forget market price, work out what the stock is worth (use reverse DCFs).
7. •Don'�’t take information at face value, think carefully about how it was presented to you.
8. •Don�’'t confuse good firms with good investments, or good earnings growth with good returns.
9. •Vivid, easy to recall events are less likely than you think they are, subtle causes are underestimated.
10. Sell your losers and ride your winners.

Download the whole report here.