With our expertise, we can help you to mitigate behavioural biases
21 August 19  /  Insights

As humans, we have developed a set of inherent and deep-rooted behavioural biases that help us to make decisions quickly on a day-to-day basis, but they can also have an unintended negative influence on investing decisions.

Investor behaviours are shaped by a number of factors, including lived experience and emotions. Emotions can lead to illogical investor decisions, which can be difficult to recognise if you are solely responsible for your financial decision-making. As an example, overconfidence bias is a general term to describe an individual’s tendency to overestimate their abilities; in financial planning, this would mean placing high value on your decisions, regardless of their actual viability.

It is vitally important to assess investments holistically and with the guidance of an expert, as what seems like a ‘losing’ investment may hold strong future-prospects that are aligned to your situation - your current circumstances and your ideal future state.

According to Richard Thaler, a leading economist who was awarded the Nobel Prize for Economics in 2017 for his contribution to behavioural economics, "people have a strong tendency to go along with the status quo or default option."

If the market falls, you may ‘anchor’ to the first piece of information that you see, for example a news article, and this may lead you to pull out investments. In reality, your financial circumstance is entirely unique to you and as such, a number of factors should be considered before making decisions relating to your investments. If the market falls, this does not necessarily mean that you should remove your investment - could the potential long-term benefits outweigh the short-term gain of reacting on your behavioural biases? These are key considerations that our expertise can support you with.

As lifestyle financial planners, we look holistically at your ‘whole picture’, which gives us an in-depth understanding of your unique circumstances and how to protect the things that are important to you. With our decades of experience, we are strongly-positioned to support you through financial decision-making, and our knowledge of behavioural biases means that we are able to identify them and mitigate the associated risks.

There is no one-size-fits-all approach to lifestyle financial planning. Working collaboratively, we join our clients on their journeys, offering guidance and support that is tailored around each client’s requirements.

To find out more about how we can help you with your decision-making,  please get in touch with us today

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