Investments

Infographic: Is Human Behavior Hurting Your Portfolio?

In the current investment environment, behavioral finance is relevant as we assess the tradeoffs between active, passive and passive plus strategies. Additionally, we wrestle with what is likely to be a low-return environment influenced by automated trading programs, newly devised (and largely untested) quantitatively composed instruments, and ceaseless flows of data-driving market activity. A strategic, long-term approach will add value amid what can seem like chaos; those who devise such approaches need to be aware of their own unintended biases.

Effective governance of an investment portfolio requires institutions to consider an array of risk- and return-based information about asset allocation, manager selection and performance evaluation. To be good stewards and make better decisions, committees should be cognizant of the way in which less-than-ideal psychological influences are at work in most human decision-making.

Confirmation/familiarity bias traits and considerations
 

Learn to focus on the facts

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