Beat the Crowd How You Can Out-Invest the Herd by Thinking Differently

Train your brain to be a real contrarian and outsmart the crowd

Beat the Crowd is the real contrarian’s guide to investing, with comprehensive explanations of how a true contrarian investor thinks and acts – and why it works more often than not. Bestselling author Ken Fisher breaks down the myths and cuts through the noise to present a clear, unvarnished view of timeless market realities, and the ways in which a contrarian approach to investing will outsmart the herd. In true Ken Fisher style, the book explains why the crowd often goes astray—and how you can stay on track.

Contrarians understand how headlines really affect the market and which noise and fads they should tune out. Beat the Crowd is a primer to the contrarian strategy, teaching readers simple tricks to think differently and get it right more often than not.

• Discover the limits of forecasting and how far ahead you should look
• Learn why political controversy matter less the louder it gets
• Resurrect long-forgotten, timeless tricks and truths in markets
• Find out how the contrarian approach makes you right more often than wrong

A successful investment strategy requires information, preparation, a little bit of brainpower, and a larger bit of luck. Pursuit of the mythical perfect strategy frequently lands folks in a cacophony of talking heads and twenty-four hour noise, but Beat the Crowd cuts through the mental clutter and collects the pristine pieces of actual value into a tactical approach based on going against the grain.

KEN FISHER is best known for his prestigious "Portfolio Strategy" column in Forbes magazine, where his over 30-year tenure of high-profile calls makes him the third longestrunning columnist in Forbes's 90-plus-year history. He is the founder, Chairman and CEO of Fisher Investments, an independent global money management firm managing over $60 billion for individuals and institutions globally. Fisher is ranked #240 on the 2014 Forbes 400 list of richest Americans and #653 on the 2014 Forbes Global Billionaire list. In 2010, Investment Advisor magazine named him among the 30 most influential individuals of the last three decades. Fisher has authored numerous professional and scholarly articles, including the awardwinning "Cognitive Biases in Market Forecasting." He has also written ten previous books, including national bestsellers The Only Three Questions That Count, The Ten Roads to Riches, How to Smell a Rat, Debunkery and Markets Never Forget (But People Do), all published by Wiley. Fisher has been published, interviewed and/or written about in many major American, British and German finance or business periodicals. He has a weekly column in Focus Money, Germany's leading weekly finance and business magazine.

ELISABETH DELLINGER is an analyst and staff writer at Fisher Investments and has been with the firm for over a decade. She is a senior editor of MarketMinder.com and a contributor on Equities.com as well as other financial news websites.

Preface ix

Chapter 1: Your Brain�]Training Guide 1

Wall Street’s Contrarian Contradiction 4

The Curmudgeon’s Conundrum 5

There Is Always a But 6

Why Most Investors Are Mostly Wrong Most of the Time 8

The First Rule of True Contrarianism 12

The All-Seeing Market 13

Different, Not Opposite 14

The Right Frame of Mind 15

Check Your Ego 16

Chapter 2: For Whom the Bell Curve Tolls 19

Wall Street’s Useless/Useful Fascination With Calendars 23

Professional Groupthink 25

How the Contrarian Uses

Professional Forecasts 26

Even the Best Fall Sometimes . . . 30

How to Beat the Street 39

Chapter 3: Dracula and the Four Horsemen of the Media Apocalypse 47

The Media’s Flawed Financial Eyesight 50

Dracula Around the Corner 53

Looking for Growth in All the Wrong Places 59

The Magic Indicator 62

War—What Is It Good For? 71

Don’t Be a Cow, Be a Contrarian 77

Chapter 4: Not in the Next 30 Months 81

Baby Boomer Bomb? 85

What About Social Security and Medicare? 86

But What if the “Lost Generation”Stays Lost? 90

What About Debt? 93

But What if Debt Causes Runaway Inflation? 98

But What if America Stops Innovating? 98

But What About Global Warming? 100

What About Income Inequality? 102

What if the Dollar Loses Its Place as the World’s Reserve Currency? 105

What the Markets Know 108

Chapter 5: Take a Safari With Jack Lemmon and Walter Matthau 111

How the Elephant Got Its Tusks 114

Dumbo, Gross Margins and Other High�]Flying Elephants 116

When Good News Dresses Up as Bad News 118

The Yield Curve Curveball 121

When Elephants Attack 127

A Brief History of Tragedy 127

When Textbooks Lie 129

It Can’t Be an Elephant If … 134

Chapter 6: The Chapter You’ll Love to Hate 137

Step 1: Ditch Your Biases 140

My Guy Is Best, Your Guy Is Worst and Other Unhelpful Opinions 141

A Magical Elephant Named Gridlock 145

(Not) Just a Bill Sittin’ on Capitol Hill 150

That Which Is Seen and That Which Is Unseen 156

What’s Worse Than a Politician? 158

Why the Government Already Made the Next Crisis Worse 162

Chapter 7: Put Those Textbooks Away 169

Don’t Toss Your Textbooks—But Know Their Limitations! 172

The First Commandment: P/Es Aren’t Predictive 175

The CAPEd Crusader Is No Superhero 178

Small Beats All? 181

Fancy Formulas and Other Academic Kryptonite 184

Theory Isn’t Reality 189

If Not School, Where? 193

Chapter 8: Throw Away This Book! 197

Miley Cyrus, Justin Bieber and Pop Star Economists 200

Classics Are Classic for a Reason 203

Philosophy and Econ 101 209

How to Learn From the Legends 216

Those Who Forget History . . . 225

Classics in the Twenty�]First Century 230

Chapter 9: When Miley Cyrus Meets Ben Graham: Misadventures in Behavioral Finance 235

Where It All Began 238

The Beginnings of Behavioral Finance’s Drift 240

When Academics Met Capitalism and Marketing 240

Behavioral Finance and Tactical Positioning 242

Recency Bias and Sentiment 251

How to Gain a Tactical Advantage With Behavioral Finance 254

A Section for Stock Pickers 259

Know When to Say When 266

Getting Back to Self�]Control 268

Chapter 10: The Negative Myopic Media 277

How to Use the News 281

What the Media Always Misses 285

In Technology (and Capitalism) We Trust 289

Parting Thoughts 290

Index 293

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