12/04/2023
Investors behaviour often deviates from logic and reason, and investors display many behaviour biases that influence their investments decision - making processes. Below, H.Kent Baker and Victor Ricciardi describe some common behavioural biases.
Most investors can be classified as either overconfident or status quo investors. Overconfident investors tend to be overly active traders and status quo investors display a lack of attention to managing their portfolios. The best advice is to find an appropriate balance between the two type of investors
Although investors cannot avoid all biases, they can reduce their effects.
Investors also need to invest for the long-term, identify their level of risk tolerance, determine an appropriate asset allocation strategy, and rebalance portfolios at least yearly.
Reference: The European Financial Review
