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BEHAVIORAL BIASES IN INVESTING

by Allison Wilson COMMUNITY WEALTH ADVISORS - RAYMOND JAMES



Why do investors tend to have more difficulty sticking to their investment plans in uncertain market environments? That’s an easy answer - because they are human! Many are prone to human behavioral biases that can lead to emotional or irrational decision making that can have a negative impact on long-term portfolio performance, especially when the market hits a more turbulent episode. Read on to see if you recognize yourself in any of these common behavioral biases.

• Herd Mentality – the tendency of investors to follow what other investors are doing

Example: An Investor hears that people are selling a particular tech stock that he owns, so he decides to sell the stock without much regard to the reason for the sell or thought about potential negatives related to this decision.

• Loss Aversion – the tendency for investors to be more sensitive to a loss than to a gain of the same amount

Example: An investor is more upset about a loss of $1,000 in her investment portfolio than she is pleased about a $1,000 gain.

• Confirmation Bias – the tendency for investors to seek out information and opinions that agree with their own views

Example: An investor believes the market will go up over the next three months, so he seeks out news stories to support his belief and may dismiss news stories that challenges his theory.

The outcome of biases like these can lead to decisions that result in poorly timed trades. If these patterns continue, investors can see under performance in their portfolios and more importantly, have difficulty achieving their financial goals. The good news is that by being educated about subconscious behavior biases you can implement strategies to help avoid them in the future.

I invite you to join me on January 4th for a Celebration Zoom&Learn event to learn more about this topic of behavioral finance.

Use this time to support a goal for 2022 to grow your knowledge and equip yourself with a plan to lessen the negative effects that common human behavior may be playing into your investment decisions.


RSVP TODAY to attend the January 4th Zoom&Learn Event!

Visit www.celebrationmagazine.com and click on REGISTER FOR CELEBRATION EVENTS or call 469-532-2622.

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