Behavioral Finance
As humans, our survival instincts were designed for lions and tigers – not bears and bulls. While an adrenaline rush might have once helped us flee from a tiger, when it comes to a fluctuating market, sudden movements aren’t necessarily the way to go.
So how do we know if we’re relying on logic versus instinct? After all, our subconscious biases are based on much more than evolution. They’re affected by how we were raised, the things we think we know, what we hear from our neighbor and what we see on the news, along with any number of other factors. Plus, did we mention they’re subconscious?
The good news is that by being aware of some of the common biases many of us give in to, you might have an easier time catching yourself before you make a costly decision. It’s likely you’ve fallen for one or more of the four most potent biases. Here’s a look at the tricks your mind can play and how we can help you master them.
Familiarity: Your usual?
Are you a creature of habit? When you visit the grocery store, do you fill your cart with the products and brands you’ve bought for years? The same cheese, the same wine, the same soap. Is that because they’re the best of the options … or because they’re the ones you know best? It can be hard to tell, can’t it? Learn more…
Loss Aversion: Don't go down with the ship
Whether it’s a sailboat or a security, it’s hard to admit when an investment is no longer paying off - and even harder to accept the loss for what it is and move on. Sometimes, you stand to lose more by not letting go. Explore how loss aversion can expose you to risk and learn how to outsmart your subconscious. Learn more…
Overconfidence: Think you can beat the clock?
Do you sometimes convince yourself you can beat traffic or time the market? Discover how overconfidence can undermine your financial plan and learn how to outsmart your subconscious. Learn more…
Mental Accounting: Don't miss the big picture
By only focusing on the details, you can miss big opportunities. Discover how mental accounting can hold you back, and learn how to help outsmart your subconscious. Learn more…