Guarding Against Four Common Money Biases

Guarding Against Four Common Money Biases

Provided by Pam Prine

Our attitudes about investing, saving, spending and financial matters are shaped by a variety of influences, both early and later in life. These attitudes can foster some very good habits, ones that may promote smart financial choices, early investment, and the accumulation of assets. The downside is that they may also encourage unconscious biases about money, and like many varieties of bias, it is wise to acknowledge and be aware of them. 

There are four common money biases. One is loss aversion, when the fear or worry of losing assets seems out of proportion to the opportunity for gains or asset accumulation. Two is overconfidence – assuming that financial markets nearly always perform well, or that one’s personal financial acumen is infallible. Three is present bias, which is often seen in consumer behavior – the preference for a material item or a quick financial gain now, instead of delayed gratification for the possibility of better outcomes years ahead. Lastly, there is base rate neglect – an overreaction to bad (or good) news that makes a saver or investor lose sight of the worth, or risk, of a particular investment. Recognizing our potential for these biases may prevent a rash financial decision or two, especially as the retirement transition nears or occurs.1

Pam Prine may be reached at (623) 299-9710 or pam@keystonegroupaz.com www.keystonegroupaz.com

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Securities offered through J.W. Cole Financial, Inc,. Member FINRA/SIPC. Advisory services through J.W. Cole Advisors, Inc. (“JWCA”). Keystone Capital Management Group, LLC and JWC/JWCA are unaffiliated entities.   

Citations.

1 – CNBC, January 14, 2022

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