We would all like to think that we are rational human beings that make sensible and logical decisions. Sadly, this is far from the truth and in reality we often make decisions fraught with biases, many of which we aren’t even aware of. This is where behavioural economics comes in, the study of behavioural biases that can impact our decisions. A subset of this study is called behavioural finance, which specifically looks at biases that impact investment decisions. This is a huge and growing topic, so this post aims to introduce the concept gently.
The investing version of the seven deadly sins might not send you straight to hell but could still send your returns up in smoke. Here are a few of the sins that can savage your portfolio – and what you can do to avoid temptation!
It can be tempting to try timing your investments to get the best possible returns. Especially during market falls, when it can be scary to watch your hard-earned savings fall in value.