This week, I’m talking about behavioral finance. An incredibly important topic when it comes to your money and your retirement, yet at the same time it’s something that few people really, truly understand. Essentially, behavioral finance looks at how your psychology, your emotions, and your biases impact your decisions and your behavior when it comes to your money.
Today I’m talking about herd behavior.
CS Lewis summed up herd behavior quite well when he said 'When the whole world is running towards a cliff, he who is running in the opposite direction appears to have lost his mind.”
But sometimes being a good investor requires that you run in the opposite direction. Herd behavior is so common, I don’t have to dig very deep to give you some good examples. If you weren’t buying bitcoin in late 2017, gold in 2011, or profitless tech stocks in the late 1990s, you probably felt like an idiot. If you weren’t flipping houses in 2005, you likewise felt like you had missed the boat.
There is never a shortage of people out there who will brag about their massive wins, but you almost never hear about the other side...when that person was dead wrong, bet everything on a hunch, and then lost it all.
If you’re not careful, herd behavior can cause you to make some bad decisions - like buying some hot stock when it’s way overpriced, or jumping into an investment opportunity without investigating whether or not it makes sense for you. When the stock market is down 30% and everyone around the water cooler is bragging about how they moved to cash right before you-know-what hit the fan, it takes discipline to stay invested and ride things out.
To avoid falling victim to herd behavior and making poor decisions as a result, it’s important to remember that the masses are often wrong - very often. And you can’t rely on what’s right for everyone else as a shortcut to figuring out what’s right for you. Remember - you don’t need to run over the cliff just because everyone else is.
Your retirement is perhaps the most important financial decision you’ll ever make. You want to get it right. Well, so do I. For the last 12 years, I’ve been helping clients just like you make the transition into retirement. If you want to talk one-on-one with me about whether or not you can retire, head on over to truenorthra.com, where you can book a 15 minute call with me, at a time that’s convenient for you. The call is confidential, free, and I promise to help guide you on whatever is weighing most on your mind right now regarding your retirement. So head on over to truenorthra.com and book a call today.
Thanks for listening! My name is Ashley Micciche and this is the One Minute Retirement Tip.
----------
>>> Subscribe on iTunes: https://apple.co/2DI2LSP
>>> Subscribe on Amazon Alexa: https://amzn.to/2xRKrCs
>>> Check out our blog: https://truenorthretirementadvisors.com/blog/
----------
Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance, wealth management, fee only financial advisor, financial planner, financial podcast, retirement podcast, financial independence podcast, behavioral finance, behavioral finance concepts, behavioral finance examples, behavioral finance biases, why is behavioral finance important, behavioral economics, investor psychology, behavioral biases, herd behavior, herd behavior and investment, herd behavior financial crisis, loss aversion, prospect theory
Comentarios