Exploring Decision-Making, Illusory Truth Bias, and Pain's Impact on Financial Risks

Sometimes an oft-repeated axiom, maxim, or cliché has at least a small piece of truth to it. Others make sense and are true in some situations, but not others. 

The world of finance and investing is no exception to the coining of popular axioms and the misconceptions that can go along with them—especially when it comes to trading stocks. Traders are well-supplied with frequently repeated sayings that speak to perceived data patterns. And they must work to gut-check choices plagued by their own emotional biases.

On this episode of Financial Decoder, host Mark Riepe is joined by Nathan Peterson, director of derivatives analysis, to unpack a handful of these more ubiquitous expressions around investing and trading and give insight into how much weight they should carry in your decision-making.

To read the study Mark references on the connections between risk tolerance and visceral pain, check out "Relating the Visceral Factor of Pain to Domain-Specific Risk Attitudes" in the Journal of Behavioral Decision Making.

Financial Decoder is an original podcast from Charles Schwab. For more on the series, visit Schwab.com/FinancialDecoder. 

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