Learning this is how your brain impacts your money decisions will save you making costly mistakes. Dr Daniel Crosby, pyschologist, behavioral finance expert and author reveals the Psychology of Money- 4 common behavioural errors.
Dr Crosby helps organizations understand the interestion of mind and markets. His first book, Personal Benchmark: Integrating Behavioral Finance and Investment Management, was a New York Times bestseller. His second book, The Laws of Wealth, was named the best investment book of 2017 by the Axiom Business Book Awards and has been translated into 5 languages.
Dr Crosby’s latest work, The Behavioral Investor, is a comprehensive look at the neurology, physiology and physhology of sound financial decision-making. It is a look at how the brain impacts our financial decision making and how you behave around money.
As you are still primeval beings your bodies are always looking for ways to do less. To take the cognivite load off you minic your neighbours and what you see on the television. Dr Crosby says that as you are primeval, you are not wired to make optimal decisions. Our decision making can be influenced by outside circumstances such as how long it has been since you ate a meal.
As you are emotional beings there are emotions attached to everything you do. There is no such thing as an unemotional decision. Dr Crosby says you should avoid emotional extremes such as feeling hungry, lonely or tired before making any important money decision. This has seen the rise in the use of robo advisors to allocate money in a sensible way as robots are unemotional.
4 Common Behavioural Errors:-
- Over confidence – this can be about the forcast for the future of the markets or show up as excessively concentrated stock positions
- Emotions – when there is a shortfall in our retirement savings this can lead to taking on excessive risk. We need to understand the tight relationship between risk and reward
- Conversationism – like home country bias with our stock allocations
- Attention – people worry about some scarry things that might happen like a great depression. In reality these grand calamities happen every 100 years.
In this episode or Retire Well Retire Happy Dr Crosby reveals the Psychology of Money- 4 common behavioural errors. Learning this is how your brain impacts your money decisions will save you making costly mistakes.
Gail Forrest looks at humour and aging and how it transforms you. Wouldn’t you all like to know how to keep your wits about you in old age? Having the best attitude to life will help keep you young according to Gail. It’s like the analogy of ‘is your glass half empty or half full’. It’s the same volume in the glass but if you look at the glass being half full then you are well on the way to having a happy life. Or like Gail says she prefers the ‘glass full of wine’.