We like to think we invest rationally, but the field of behavioral finance has shown there are social, emotional and even cognitive factors that can affect our investing decisions. Those factors, also called behavioural biases, can undermine our decision-making ability and impact our long-term success. Behavioral biases are more common than you might think. Watch these short videos to see how they show up in our everyday lives.
Home Country Bias: Investors have a tendency to favour companies and products from their home countries or regions, and may therefore miss out on global opportunities.
Availability Bias: Something that is personally most relevant, recent or traumatic, can have a strong influence on investors’ decision-making capabilities.
Herding: Investors tend to feel most comfortable following the crowd and assume the consensus view to be the correct one.
Loss Aversion: Investors tend to display a preference to avoid a loss because the associated pain is more intense than the reward felt from a gain.