Investors are often led astray by a variety of irrational cognitive biases. When we feel overwhelmed by excess information, by too many choices, we react by doing nothing. The disposition effect highlights how humans have a tendency to sell their winners and hold on to their losers. There's research that when people give into this disposition effect it actually hurts their investment returns.
#388: Recessions are terrifying.
Market crashes often bring out the worst in people’s anxieties and fears.
This fear triggers us to act even more irrationally than usual – which can lead to making expensive mistakes in our investment portfolios.
In today’s episode, Scott Nations, who spent his career studying market volatility, describes some of the most common cognitive biases and irrational behaviors that investors make. He shares tips on how to master the mental game of investing, especially in turbulent times.
For more information, visit the show notes at https://affordanything.com/episode388
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