A Great Book for People Who Think Investing Is Difficult

James P. O’ Shaughnessy wrote the perfect book for people who think that investing has to the risky, complex, and danger­ous. It is also the perfect book for those who want to think that they can outsmart the market. This book has the aca­demic and numerical proof that a passive or mechanical sys­tem of investing will in most cases beat a human system of investing.. . even professional investors such as fund man­agers. This book also explains why nine out of ten investors do not make money.

O’ Shaughnessy’s best-selling book is titled “What Works On Wall Street: A Guide to the Best Performing Investment Strategies of All Time”. O’ Shaughnessy distinguishes between two basic types of decision-making:

1. The clinical or intuitive method. This method relies on knowledge, experience, and common sense.
2. The quantitative or actuarial method. This method re­lies solely on proven relationships based on large sam­ples of data.

O’ Shaughnessy found that most investors prefer the intu­itive method of investment decision-making. In most in­stances, the investor who used the intuitive method was wrong or beaten by the nearly mechanical method. He quotes David Faust, author of The Limits of Scientific Reasoning, who writes, “Human judgment is far more limited than we think.” Read more