Behavioral Finance: Can you improve your financial decision-making with self-awareness?

How do people make investment decisions: With their heads or with their ‘hearts’? Nobel-Prize winning academic research indicates that people make emotional decisions when thinking about their finances and investments. And yet so much of the time advisors like us spend time analyzing and discussing facts, figures, statistics, and logic to help our clients get to what we consider to be the “right” decision.

The following videos about Behavioral Finance are designed to help you identify some of the common cognitive biases (read: fallacies) that as a completely “normal” human being you might fall prey to when making decisions about your investments and financial and retirement plans.

Enjoy and let us know what you think!

Part 1: An introduction to why the Efficient Market Hypothesis is wrong.

Part 2: Behavioral Finance biases at a glance – heuristics & cognitive biases

Part 3: Herding Bias – when you discount your own information in favor of those around you

Part 4: Availability Bias – are you overestimating by the virtue of recent events?

Part 5: Loss Aversion – we feel a loss twice as much as we feel a gain

Part 6: Endowment Effect – people overvalue what they already own

Part 7: Confirmation Bias – people look for evidence that confirms pre-conceived theories

Part 8: Anchoring – you can affect the way you make a decision by how you frame the question