Investing your hard-earned savings can often be a nerve-racking experience. A recent study carried out by Schroders has identified that there are nine main behaviours that can influence your financial decision making when it comes to investment.
- Anxiety – when the ups and downs of the market cloud the view of long-term goals
- Loss Aversion – losses are felt more keenly than equivalent gains
- Projection Bias – struggling to separate current feelings from future plans
- Irrational perception of money – viewing wealth and income as nominal rather than in real terms
- Herd influence – irrationally following the decisions of others
- Present bias – when preference is placed on instant gratification
- Overconfidence bias – believing in oneself without giving proper consideration to alternative options, chance, or external events
- Over optimism bias – overestimating the likelihood of success and underestimating the risks involved
- Investor knowledge – tendency to be led by ‘gut-instinct’, and lacking interest in growing financial knowledge through research
Recognising these biases is the first step towards making clearer, more rational decisions about investing your money.
If you would like to Schroders incomeIQ test head to schroders.co.uk/incomeIQ