Out-Behave the Herd--6 behavioral investing mistakes & how to avoid them скачать в хорошем качестве

Out-Behave the Herd--6 behavioral investing mistakes & how to avoid them

How many of us can say we were traveling, in an unusual area, and relied on Google Maps for a crowd-sourced solution to our next meal? How about going online to find a list of the top ten best places to travel in France, the best running shoes to buy, or the top five best gardening gloves on the market? While this can work incredibly well, following the crowd does not always work as well in the investing world. ►Subscribe to our newsletter: https://www.conestogawealth.com/conta... ►Visit our website: https://www.conestogawealth.com/ ►Subscribe to our Channel:    / @conestogawealthpartners4614   Video Summary: We focus on a few behavioral biases in this video. We also share a few strategies that help us overcome these biases. Our strategies come from the study of behavioral finance, the intersection of behavioral psychology and finance that helps explain why people make irrational financial decisions. It informs every decision we make. We cover 6 major biases: 1. Anchoring Bias: allowing first bits of information to influence us more than they should, even as we start to get more information and see the bigger picture. Just because something costs less than it did before, does not mean we should buy it. Sometimes there’s a great reason why something has dropped in value, and you don’t necessarily want to be a part of that reason. 2. Confirmation Bias: seeking out information that confirms an existing belief. Take Benjamin Franklin: he decided to give up meat, comparing eating animals to murder. Until he smelled fish cooking and decided he was going to eat the fish. Torn between his principles and the delicious smell, he searched out the rationale he wanted, not what was logical. He justified eating the cod by noticing cod eat other fish, and thus justified in eating the cod. 3. Recency Bias: basing decisions only on the most recent information. As Warren Buffet said, “What we learn from history is that people don't learn from history.” This bias is like driving a car on the highway by staring only at the ten feet in front of you. You risk crashing the car. 4. Herding Bias: following the crowd instead of making decisions independently. We as humans are capable of thinking rationally, but we are also capable of groupthink. 5. Ambiguity Aversion: a tendency to avoid the unknown. We like certainty, we like knowing what we are choosing, and we love guarantees. However, in the investing world, there is no free lunch. If we want to remove unknowns from an investment, we usually have to give something up in return. 6. Myopic Loss: experiencing more sensitivity to losses than gains. People tend to feel losses much more than gains. Studies showed that people choose to take a risk only when the potential gain is assymetrically greater than the expected loss. “Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.” Addressing these challenges How do we beat these biases? 1. Anchoring Bias: Acknowledge the anchor when making decisions. Understand, address, and remember the goal—not the dollars. Recognize that the ways choices are presented will affect the decision. 2. Confirmation Bias: Admit that different situations call for different expertise. Seeking out confirmation of options is a surefire way to “group think.” 3. Recency Bias: Yesterday’s truth is not tomorrow’s. No pattern continues forever. Remind yourself that you are in the midst of a process. You will not need all of your money tomorrow, or next month, or next year. 4. Herding Bias: Running with the crowd may prevent solitary embarrassment, but will not keep you from being wrong. By the time everyone is heading a particular direction, it is usually time to start heading the other way. 5. Ambiguity aversion: goal-based planning is the key to success. Outcomes should drive your actions, not fear of the unknown. 6. Myopic loss aversion: financial losses are often “locked in” by panic selling. Keep a focus on the long-term goals in order to drive success. Other tips that we have found most helpful: 1. Get to know yourself. Become aware of how your tendencies can influence financial decisions. We all have our strengths and weaknesses. 2. Avoid panic selling: stay invested during times of volatility and market uncertainty. 3. Stay focused: do not dwell on the past; focus on your long-term goals and time horizon. 4. Consult with your advisor: your financial advisor can help take the emotion out of investing. We are not smarter than you—we have simply either seen nearly every mistake someone can make, or we have made them ourselves. Lean on our experience and knowledge for guidance. More information about who we are: https://www.conestogawealth.com/about... #financialplanning #biases #investorbehavior #financialadvice