We always think of how much the price of a new car, but can not supervise their daily bill each week. We tend to overestimate their own ability, but often undermine the long-term return on high-risk investments. Disentangle cause and effect learn the complicated, we will benefit. The results show that the dynamics of economics, people’s emotions and experiences can distort our financial decisions.
That they involve the following seven areas of financial negligence and the corresponding psychological analysis.
Right hand into his left hand out
Symptoms: a credit card to pay up to 15% of the cost, and to have a 5% savings rate complacent.
We often feel the high price of a new car trouble, but did not notice their own huge shopping list for a week.
Blindly follow the trend
Symptoms: a large number of people that will purchase the stock rose; weakness in the market to sell their own hands when a large number of stocks; from friends and relatives get stock information.
From the U.S. stock market crash of 1987 has 20 years, on what caused the Dow Jones Industrial Average slumped 23% did not stop the discussion, economists vividly investors metaphor of “Lemmings”, often of large-scale migration events. In the stock market, the seller has been unable to control the overall situation, because at this time that investors have floundered.
Too seeking “stability”
Symptoms: fast selling profitable stocks, but then the stock has lost hesitation; be too much money into the financial markets, but not enough remaining; even though profits have been great, but also hesitant , could not bear to sell.
Nobody likes to lose money trading. Under normal circumstances, we can avoid some losses, but we note that, while direct consumption, but they ignore the cost of lives bit by bit.
Example, we feel that by $ 4 $ 4 discount and avoid the fine that both are comparable, but most people would rather avoid those penalties.
Answers from the fortune-telling crystal ball
Symptoms: risk of misunderstandings, too much money to own the stock on which the Company; have a very low deductible insurance; that stocks would rise forever.
In the United States, more than two-thirds of people have life insurance, but fewer than one-third of Americans for the disability insurance. The reality is that in life, 35-64 years of age, with more than six times about the serious damage.
Moreover, these injuries will make them miss a lot of work opportunities for advancement. According to economists and psychologists, as saying that the so-called “practical prejudice”, it is also a way to measure risk.
Researchers at the University of Chicago
Castro called on the possibility of its neglect. Castro pointed out that this strange phenomenon of daily life, we often will be the best or the worst case which occurs interested, but do not ask in the end what is most likely to occur in the future.
Self-interference
Symptoms: frequent trading; feel that they are the best.
Studies have shown that we often overestimate their own abilities. In life, self-confidence and optimism are essential advantages, but if put it in the stock market, over-confidence would create the idea to compete with the market. In the dictionary of these people, “trading is risky to bring high profits.” But in fact, they can not, can not be achieved. To do so would have high-risk investments, excessive trading and other adverse consequences.
Care for immediate benefits
Symptoms: a 401 plan (ie, a reasonable retirement plan) failed; their monthly income did not make a corresponding budget, and just wait for the retirement payment of wages.
The face of such a move to delay, behavioral economists, analysts pointed out that less than half of employees to participate in the 401 plan. David of Harvard University economics professor, said, “a tendency in society – the cost in time and reward the staff with a more realistic significance.”
More make up the greater vulnerability
Symptoms: according to time and money previously paid to how the cost basis as the current, it ignores its future prospects.
related to hot words: psychological investment banking error
Posted in 
Tags: 
