NerdWallet's Smart Money Podcast
Behavioral Finance Mistakes That Hurt Your Portfolio and What “Good” Returns Look Like
Feb 24, 2025
In this enlightening discussion, Yohance Harrison, a behavioral financial advisor and founder of Money Script Wealth Management, explains how psychological biases like anchoring and recency can derail investment decisions. He emphasizes the need for patience and strategic long-term planning to counteract emotions in trading. The hosts also dive into what constitutes a 'good' return on investments and when to reconsider your strategy, providing listeners with practical advice for navigating market volatility.
29:05
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Quick takeaways
- Behavioral biases like anchoring and recency can distort investment decisions, emphasizing the need for a long-term perspective in finance.
- Setting realistic expectations for returns and creating a defined investment plan can help mitigate emotional decision-making during market fluctuations.
Deep dives
Overcoming Behavioral Biases
Behavioral biases can significantly impact financial decision-making, often leading individuals away from their investment strategies. One common bias is cognitive dissonance, where conflicting beliefs lead to confusion and poor choices, like being excited about a stock while also criticizing its company's prices. Anchoring is another bias, where initial price information influences ongoing investment decisions, causing investors to ignore a stock's actual value. To combat these biases, individuals should focus on the broader picture of their investment goals rather than getting fixated on the first number they encounter.
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