Behavioural Traits To Avoid When Investing

Overconfidence

This may lead you to overestimate your ability to make rational investment decision. An experience Financial Services Consultants would be able to provide you with realistic expectations of investment return and flag potential risks. They shall advise and plan for you accordingly to your risk appetite and ability.

Over- optimism

We tend to overestimate the likelihood of success without focusing on any potential pitfalls. We may be too focused on the potential positive outcomes and do not realistically consider the possibility of losses. Have a full understanding of the investment you are considering and how it can be impacted during different market environment. Diversification may be one of the ways. It does not guaranteed against losses but it helps to spread your money across a variety of different investments to limit the impact of markets ups and downs.

Impulsivity

We tend to overvalue immediate rewards to the detriment of long term goals. Work with your financial adviser to set and stay focused on your long term goals.

Projection Bias

We tend to believe that our current views and needs stay the same over time. But we know our investment environment changes every day. Your financial adviser shall put you in stress test your investment portfolio and stimulate its performance under adverse market conditions.

Anxiety Bias

We are easily influenced by the short term up and downs of the market and feel compelled to take action. This action undermines your long term financial objectives. Your financial adviser shall refer to the record and explain the key decisions to avoid panic selling to avoid short term losses. When we set our goal together with financial adviser, they will help us to foucs on long term view of our investments and avoid impulsive or unnecessary actions.

Herd Bias

We are easily influenced by the thoughts and behaviour of those around you and assume that herd collectively knows something you don’t. Always ask what driving herd’s behaviour is. Seek independent or professional advice.

Ambiguity Aversion

We are likely pick what we perceive to be safer and predictable investment that pays you a fixed amount regularly over volatile investment even if their return potential may be higher. An uncertain outcome doesn’t always means negative outcome.

Regret Aversion

Fear that your decision turn out to be wrong. Have regular review with your financial adviser to avoid any regret.

 

Please note:

The information contained in this article is for general guidance on matters of interest only. While we made every attempt to ensure that the information contained herein has been obtained from reliable sources, we are not responsible for any errors or omissions, or for the results obtained from the use of this information. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any financial products. As such, before taking any action you should seek advice from an independent professional advisor.

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