Behavioural Science in Finance
Published / Last Updated on 07/03/2020
Changing people’s habits, bias and emotions to make finance and investment decisions more rational.
Self Deception – be aware that you are probably deceiving yourself into thinking you know more than you actually do. Many financial advisers are degree qualified in finance and deal with the technicalities of tax, investing, markets and risk everyday and have likely been doing so for many years. Do not ‘kid’ yourself that you know as much or can do it better – this is how you make mistakes.
Heuristic Learning – where you discover or learn something for yourself. Be very careful over self diagnosing or relying on your own research. What if you have learned or believe you have understood something and in fact you have got it all wrong meaning that all the decisions you then make about your finances are flawed?
Social Influence – be aware that the way you have been bought up, educated, social media, news, work, colleagues and friends may influence how you think about money. Try and remove these and make rational finance decisions.
Emotions – whether you are happy, sad, ‘wired’, depressed, hungover, euphoric – remember you must not make decisions about your money at that point – again remove all emotion to make rational finance decisions.
We are using Behavioural Finance concepts and ideas in our ‘robo advice’ application that we are building.
