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Category: Behavioral Finance

Habits of Successful Investors

Habits of Successful Investors

Every year has its trends. Fashion, fitness, weight loss, parenting, health—name your pick. My least favorite of 2018, the social media trend that was Habits of Successful People. Pick the number; seven, ten, fifteen—Lifehack went as far as bombarding readers with 50. I cringe every time I see a post about this topic—mostly on LinkedIn. The majority of posts seem more like marketing ploys than career advice. Waking before 4 a.m. was a staple in every article. Not all advice…

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You’ve Been Framed

You’ve Been Framed

The study of behavioral finance defines framing as the tendency of decision-makers to respond to various situations differently based on the context in which a choice is presented. In many contexts, the decision maker is influenced by the manner in which the data is presented. As an example, consider this headline from last week: “Dow Jones drops 832 points in third worst drop in history.” If you think this was an isolated news story, Google “third worst point decline in…

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Storm Front

Storm Front

At the halfway point, equity markets are on course to have a rather normal year; although it doesn’t feel that way to investors. Watch financial television or read financial newspapers and it’s been hard to miss the “market volatility” headlines. Indeed, political and economic news has been dramatic enough that Billy Joel would certainly include them if he decided to highlight the second part of his life with a remake of the 1989 hit “We Didn’t Start the Fire” (released…

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Your Money and Your Brain

Your Money and Your Brain

Scientists often claim your brain is more advanced than the most powerful supercomputers. As an investor, this is a power tool you have at your disposal. Yet all too often, our brain gets in the way of making rational investment decisions. Actual decisions made by investors versus what academia says they should do is explained by the study of behavioral finance.