How your belief systems shape investment decisions
Thoughts and feelings are powerful forces that influence the decisions we all make, and often there can be a healthy dose of bias tossed into this mix. As the Coronavirus pandemic continues, it can be difficult to process ongoing changes related to social distancing, economic turbulence and the deluge of information coming at us.
Part of your reaction to these stressors can be traced back to something called cognitive bias, which is the study of how underlying belief systems affect decision making. The Solutions video at https://mysolutionsonline.ca/solutions-videos/behaviour does a great job of explaining this concept—a fascinating topic that can help shed some light on the choices we make about everything from how we invest, to what we buy, which job offer to take, and even whom we choose as friends.
Here are a few cognitive biases I know many of us can relate to:
- Fear of missing out – worrying that others are having a more rewarding experience
- Choice overload – delaying or avoiding decisions when there are too many options
- Herd behaviour – copying what others are doing
When life feels complicated, having a knowledgeable and objective second opinion can help a great deal.
As always, if you have questions about the markets, your investments, or your overall financial health, we are here to talk.
WK Financial Planning