Behavioural finance has become a more mainstream branch of economics, as shown by the recent awarding of the Nobel Prize in economics to Richard Thaler for his work in the field. But what are some of the practical ways we can draw on behavioural finance to make better investment decisions?
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Using behavioural finance for investing
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Use the time codes below to skip to topics of interest:
00:44: Identifying emotional pitfalls in investment decision-making and avoiding them, with some practical examples
04:55: The importance of a good relationship between client and wealth manager
06:50: The risk of overconfidence. Discerning luck from skill
08:45: How behavioural finance is now mainstream – and why traditional economic theory is still relevant
Understanding our behavioural patterns, and the pitfalls we often fall into, can help us make better decisions in life, including better decisions about our investments.
Recognising our faults is one thing, but avoiding them can be more difficult – and here the help of a good adviser can make all the difference.
Drawing on years of experience in wealth management, Neil Urmson provides some practical examples of how a skilled professional can guide investors in the right direction.
He touches on overcoming feelings of fear, anxiety or overconfidence, and highlights the importance of patience in making good investment returns over time.
Finally, he argues for the importance of incorporating the best of traditional and behavioural economic thinking in managing investments.
Original podcast published on 08 November 2017.
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