Whether you realize it or not, most of us have some kind of bias when it comes to money. On today’s episode we are going to explore four main biases that probably impact most of us to some degree and how we can overcome these barriers.
Recency bias, could cause you to lose money when the market is volatile. With loss aversion, people are looking for less risk when they really don’t need to be. So how do we avoid these biases and make sure our plan is protected? The goal with behavioral finance is truly to understand why we make certain decisions and how these decisions will affect our finances.
What We Discuss Today:
1:29 – What is behavioral finance?
2:19 – The key points of behavioral finance
4:52 – The recency bias
5:43 – Emotional decision making
6:28 – Loss aversion
8:10 – Overconfidence
8:57 – Anchoring bias
10:14 – Don’t get too caught up
12:31 – Understanding your values
13:18 – A client impacted by bias
14:43 – The first step in your plan
“These are investors who have confidence in their long-term financial plan but they tend to forget… the short-term things.” – Spiros Vassilakos