Understanding Behavioral Finance: How Emotions and Cognitive Biases Impact Investment Decisions

Episode Transcript
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(00:50):
Aloha inspired Money maker. Thanks for joining us today. If
this is your first time here, welcome. If you're a returning
viewer or listener, welcome back. I want to start with a
quote. Nothing is perfect. Life is messy.
Relationships are complex. Outcomes are uncertain.
People are irrational. That's a quote from Australian psychologist

(01:12):
Hugh McKay. And people like to think that they're rational,
especially when it comes to money. But the truth? We're not.
Investors make emotional, biased decisions all the time,
often without even realizing it. Fear drives panic selling,
greed fuels bubbles, and overconfidence leads
to taking too much risk sometimes. Traditional finance

(01:34):
assumes that markets are efficient and investors act logically.
But behavioral finance tells us a different story.
It reveals the predictable ways we deviate from rational thinking
and helps us understand why. The efficient market theory may claim
that stock prices reflect all available information,
but it fails to account for human emotions. Remember

(01:57):
irrational exuberance? So how do we make smarter
financial decisions? By recognizing these biases,
learning how they shape our choices, and using strategies to counteract
them. In this episode, we're going to look at how to think and
invest more rationally before we get started. This episode
is brought to you by my financial advisory firm running Mead Capital

(02:19):
Management. I want to invite you to take advantage of our three minute financial
plan. Head over to
InspiredMoney.fm/GetPlan. It just takes three minutes
of your time and you'll get a personalized snapshot to
kickstart your financial planning journey.
It's easy, it's quick, and planning

(02:40):
goes a long way. So start your financial roadmap today.
Give it a try and I'm happy to set up a call with you to
discuss your findings. Let's bring in our
guest panelists. We've got a great group
here. There. One more. We've got
Colin Camerer. He's a pioneering behavioral

(03:01):
economist and neuroeconomist known for integrating psychology
and neuroscience into economic decision making. As a
Robert Kirby professor of Behavioral Finance and Economics at
Caltech, he researches neuroeconomics, behavioral
game theory, decision science, and neuroscience of economic
choices, earning him a MacArthur Fellowship in

(03:23):
2013 and an honorary
doctorate from the Stockholm School of economics in
2019. Colin, so glad to have you here.
Thanks for having me. It's exciting to be on this wonderful panel.
I'm looking forward to it. And you're kind of a radical
studying economics and the brain?

(03:45):
Yes. Caltech does a lot of things like that.
So usually when we go to the provost or somebody for money,
they'll say, who else is doing this? And if we say nobody that's the best
possible answer. And it's true in many areas
like biomedical engineering where people are putting together basic biology
and trying to understand neural prosthetics and lots and

(04:07):
lots of different things at Caltech. That's kind of our, our brand. Cutting edge.
Cutting edge for sure. We also have Dr. C. Thomas Howard.
He's a pioneer in behavioral finance, best known for founding or co
founding Athena Invest and authoring the influential book
Behavioral Portfolio management. With over 35 years in
academia and finance, he developed a groundbreaking

(04:29):
approach that challenges traditional investment theory by focusing on
how investors actually behave. Revolutionizing
portfolio management through a behavioral data driven
strategy. Tom, so good to have you here.
Yeah, I'm glad to be here. Thank you inviting me
Andy. Look forward to talking about how we use

(04:50):
behavioral finance for making the investment decisions in the
portfolios we manage for advisors and clients.
And a shout out to LinkedIn where I found you.
We have Annika Echarti. You have to say your
last name because I do not do it justice. You did it
great. Annika Echart. Annika Echarti.

(05:14):
She's a recent CFP, a financial coach
specializing in behavioral finance and financial psychology with
a background in accounting law and economics. She helps
self employed individuals and small business owners align their financial
decisions with their goals and values, focusing on both practical
strategies and the psychology behind money habits.

(05:36):
Annika, glad that you could join us. Thank you so
much Andy. Yes, actually I got into behavioral finance and
financial psychology because always when I talk to my clients I found
out that financial literacy is not just the one
that makes us good with money. And you teach a class at
the UCLA Extension School. Exactly. Yes.

(05:58):
Where we actually look into our own biases and
see which examples we can come up and where we
find that we have some kind of
heuristics and biases during our normal day.
We're going to be talking a lot of biases today. Then welcoming

(06:19):
back and rounding out our panel we have Dr. Megan McCoy back on
the show. PhD licensed marriage and family therapist,
accredited financial counselor, certified financial
therapist, assistant professor at Kansas State
University's Department of Personal Finance Financial
planning and she specializes in financial therapy, financial

(06:42):
well being and the dynamics of couples financial
interactions. She's published extensively on these topics while also
contributing as a board member of the Financial Therapy
association and she's co editor of the Financial Planning
Review. Welcome back Megan. Thanks so much for having me
again. You always challenge me with

(07:03):
all your accreditations. I know I can't fit it
so. So I'm glad that
you're Here I think that we have you for the next 30 minutes because
you cannot stay for the whole thing. Half class full. I'm
delighted that you're here. Let's go straight into segment one.
Traditional finance assumes investors are rational, but in

(07:26):
reality, emotions and cognitive biases often drive
financial decisions. Behavioral finance explores why people
make predictable mistakes in investing. Overconfidence leads to
excessive risk taking, while confirmation bias causes investors to
seek information that supports their beliefs. Loss aversion makes
losses feel more painful than equivalent gains, leading to poor sell

(07:48):
decisions. Emotions like fear and greed also shape investment
behavior. Fear can drive panic selling during downturns, while
greed fuels speculative bubbles. Daniel Kahneman's System
1 and System 2 thinking further explain these patterns.
System 1 drives quick, intuitive decisions, while System 2
engages in deliberate analysis. By understanding why rational

(08:10):
investing is difficult, we can start to develop strategies to
counteract these biases and improve long term financial
outcomes.
Colin, since you're at the cutting edge of neuroeconomics,
how do cognitive biases manifest in our brains
when investors make financial decisions?

(08:36):
So neuroeconomics is a vast thing and it's growing very
fast. Even it's hard for someone like me who's at a good institution with brilliant
grad students who are kind of my coaches to keep up. But I'll
just talk about one study we did a few years ago and we're continuing to
understand which had to do with artificial price bubbles. And
the advantage of that is it's hard to study price bubbles

(08:58):
because a bubble is by definition when the price is persistently above
some fundamental and then crashes. And we often don't know what
the fundamental is for things like art and crypto and gold.
But in the lab, we can create an artificial asset that pays
a known amount of actual money. So people actually earn money based on what they
do. And we can see if there's a bubble and we get very reliable

(09:21):
bubbles. But to your question, the most interesting
pattern is when the bubble is growing, we
see activity in a region of the brain called nucleus accumbens, which
is, which is responsible. It's a very old evolutionary
conserved area, which means lots of other mammals have activity there. And it's kind
of a general reward center. So what happens is

(09:43):
the people who are trading as the bubbles going up are
having more activity in this region. In fact,
it's really close to the term irrational exuberance you mentioned, which I think
was coined by Bob Shiller and then used by Alan Greenspan. So
that's kind of the fuel of the bubble. But meanwhile, there are other
traders who as the bubble is growing, start to have increased

(10:06):
activity in a region called insula cortex which isn't as well
known outside of
neuro, which is involved for essentially
it's part of the body's ambassadorship to the brain. It's an
interoceptive area which means it's the part of the brain that accounts
for how our body is feeling. So things that are negative emotions like

(10:27):
disgust and pain and financial uncertainty and
anxiety will have activity there. So the traders who.
This is essentially like the fear area. So the nucleus of humans is greed in
the brain and the insula is fear in the brain. And what causes the
crash is when the fear feeling traders
start to sell a lot and then eventually the crash occurs. So

(10:50):
this idea of fear and greed, I would say this is, there's a lot of
other studies. These things are real and they're actually in the brain and we can
see them. Any insights into
a novice trader's brain versus experienced? Because
I think the experienced traders even have to deal with this.

(11:10):
Yeah, I think we haven't. There's a, there's an old study by andy Lowe at
MIT using 10 foreign exchange traders and
they're actually trading, you know, with giant screens. And as you, as many
of you know, Forex is a foreign exchange, is a huge market. It's
in terms of trading volume, it's really, I
think it swamps the stock markets. And what he found

(11:33):
was that he measured skin conductance activity which is an all purpose measure
of a bodily reaction to arousal, whether it's good or bad
arousal. And the experienced traders had much less
activity. And we actually have seen that also in our data.
So in these lab experiments sometimes people will come a second
time or a third time and they're trading in the same way. But they've had

(11:54):
to have the experience of seeing having lived through a bubble in a crash before.
And the traders who are more experienced have less of this skin conductance reaction.
So that suggests that, you know, even with a small amount of experience
in our lab, like a few hours or a lot of experience
like 10 years trading foreign exchange, that people can develop
a, learn to kind of regulate their emotions or be less like

(12:17):
surprised and go through less of a fear and greed cycle. So
there's hope. I like to hear that there's hope. Tom,
your book Behavioral Portfolio Management argues that
investors behave predictably, irrationally.
What's the most costly behavioral mistake that you see investors
making repeatedly? Myopic loss

(12:38):
aversion is the most important. Of course, we all know about Loss
aversion. Losses are felt more strongly
than gains are thought to be
2 to 1 and myopic in that we have a
hard time viewing things in the long term.
And so anytime we run into, let's say a

(13:01):
stock goes down or your portfolio goes down or the market goes down,
it triggers that particular emotion and it
feels like you have to do something. And this
is driven by the fact that our brains are old,
hungry and impatient. They're
old. It doesn't appear it's evolved in about 150,000

(13:24):
years ago. Think of the environment 150,000 years
ago. We were surrounded by all kinds of dangers, saber tooth
tigers and so forth. And you had to respond to those.
The brain is hungry. It consumes about
20% of the energy on a daily basis, but it's only
3% of the weight. And so we're impatient because,

(13:46):
boy, back in those days, you couldn't stop and think and say, let's see, is
that really a saber tooth tiger or spraddling in the bushes?
You had to take off. And so those basic
emotions are there for everybody
and they bubble up all the time. And so unless you really think about
it and work on it, they are the things that drive your decision. So it's

(14:08):
myopic loss aversion, but I think is the most
important mistake that investors make.
Megan, what are your thoughts? I mean, it definitely seems to go back to
like primal urges, right? Fear
and greed. Do you also look at
how financial traumas influence our investment

(14:31):
behaviors? Oh, absolutely. I think the experiences we have
with our own investments, as well as observing our parents or other loved
ones in our lives, have their firsthand, almost like a vicarious
assumption of anxiety can happen. And I think there's some
interesting gender dynamics that are coming out around
loss aversion and confidence, especially around risk tolerance. We just did

(14:53):
an interesting study where we found that men were
higher likelihood of experiencing financial stress,
which led to moving out of the market when they shouldn't have. And
they also were more likely to experience overconfidence in their
decision making around investments, which also led them to make the decision to
leave the market when maybe it would have been better to just sustain over

(15:15):
time in their current position. So it's fascinating to see the
combination of lived experiences, gender dynamics, and even
previous experiences in your family can shape your investment decisions.
Guys overconfident? Never.
What about just money and emotions being so deeply

(15:37):
intertwined? Do we need to separate one from the other?
Oh, I love that for people. I would love to
take the meaning of money and the meaning of investment
decisions out of the equation. But I don't think that's
possible for us. I think we are guided by a host of
cognitive biases that influence our decision making that are

(15:59):
completely tied to our emotional stability, our
emotional how we're feeling in that moment in decision.
So I think it's impossible to do so. It'd be better to become more self
aware of what emotions are impacting your decision so you can separate
it and make a more logical choice.
Annika, how important is it to align

(16:21):
our financial decisions with our values?
Extremely important. And I like to make the distinction between
financial literacy, behavioral economics or behavioral
finance and financial psychology.
Knowing how each one has a play
and each one contributes to how we interact with

(16:44):
money and knowing your
values is very, very important. To
then go against biases we have
or to then go against emotions that are very strongly
tied to our feeling towards money,
which come from how we grew up, which surround

(17:06):
surroundings in terms of what was the economical shape
or the economic what did the economy look like at that point
and what kind of family did I
grow up? How was money talked about all these kind of things? When we
know our values, we can then try to
overcome these things and really stick to what we

(17:29):
believe in and how we want to spend our money.
Anyone else on the segment one Foundations of behavioral
finance?
Okay, let's go to segment two. Cognitive biases influence
investment decisions, often leading to costly mistakes.
Loss aversion causes investors to hold onto declining assets

(17:52):
rather than accept a loss, even when better opportunities
exist. Recency bias leads people to
overemphasize recent events, making them reactive instead
of strategic. Herd mentality drives market bubbles and
crashes as investors follow the crowd instead of independent
analysis. Other common pitfalls include home bias,

(18:13):
favoring familiar investments over better global opportunities, and
anchoring, where investors fixate on past prices rather than
current fundamentals. These biases distort rational decision
making and increase risk exposure. To mitigate these
biases, investors can implement disciplined strategies such as
predefined exit plans, systematic investing, and

(18:35):
portfolio diversification. Awareness is the first step in
avoiding these traps. By recognizing and addressing these
biases, investors can reduce errors and make more informed
financial choices.
Megan, I want to start with you. Financial therapy emphasizes self

(18:57):
awareness in financial decision making. How can investors
develop emotional intelligence to recognize these
biases? Oh, I love it. There's a beautiful book called
Facilitating Financial Health that kind of describes different exercises you can
do to kind of unpack the early emotions that may make you
more predestined to make Choices that are based on your emotions. Rather,

(19:19):
one of them is a money egg where you kind of draw out all the
early memories you have around money, whether it's giving, receiving,
earning, losing, spending, buying, whatever it is, and kind
of create a storyline about all these experiences throughout your life
and how they shape your relationship with money and impact things like your
risk tolerance and your investment, I don't know,

(19:41):
aggressiveness. So I think doing that little look
backwards can help you move forward in a better way.
Tom, you mentioned loss aversion in the previous
segment. Like
what's an effective strategy to help investors recognize when it's time

(20:01):
to cut a loss?
The best way to do it is have a predetermined selling rules.
And let's start at the very beginning with working with a
individual and how can we get them to make better decisions. The start
of this we believe is planning. Working with a financial

(20:22):
advisor we think is very important. So you develop a
plan and then you decide what their needs
are. And then you fund each of the needs separately. So you've
got liquidity needs. So you
fund that with low risk bank accounts or
money market funds. If you've got income needs,

(20:43):
your head towards retirement, you lock
those down for several years and then the rest of it is a growth
portfolio. So we call that, and it's very popular bucket
approach to doing things. Once you do that, then
you can look at each of those separately. So when the stock market is going
down, that's part of your growth portfolio. It's not part of your

(21:05):
liquidity portfolio or your income portfolio. As
an investor, and we are professional investors, we
developed rules based investing
approaches. So we do a considerable amount of research
on this and we say this is how we're going to. These are the particular
behavioral factors that we think are measurable and persistent.

(21:28):
We use those for making our decisions. We then
develop selling rules. And so it's not
watching. And we, and many of our portfolio, we don't even watch what the
stock is doing because that's an emotional
trigger. We have other triggers that say tell us
when to sell that stock and when to buy it.

(21:51):
And so that's important to develop those very
disciplined rules,
rules based investing and also for the
selling. So before you even buy the stock or whatever, you decide
what is the criteria I'm going to use for selling them.
Colin, your thoughts? Yeah, I think what Tom said about

(22:14):
my epic loss version is so profound. And so there's two parts to it, right,
which is a natural aversion to loss relative to equal size gain.
That's been well established in many, many domains, not just in little lab
experiments, but in studies of labor supply
and marathon running. People react
differently to running a 4 minute, 4 hour marathon

(22:36):
compared to 401. And
the second part of it is the myopia. Right. So in other words,
if you could say to yourself, well, the stock market went down 5%
this month, but these other good things happened to me, I'm going to kind of
cancel out that emotionally cancel out or sort of emotionally
launder that loss against some other good thing,

(22:58):
then that would do a lot of work. And the buckets approach is kind of
one way to do that. I think it takes a certain amount
of just emotional regulation. I think something
some of the rest of you will know a lot more about might have to
do also with household dynamics. So my wife for example, grew up in
a very low income child of

(23:19):
immigrants and is very, very
much of a tight wad. So as we started to accumulate some wealth,
I had to kind of train her to enjoy spending money on things like
vacations that we could well afford. And, and it really was a kind of
household financial therapy. And I think
she's much happier and I'm much happier and we're enjoying life.

(23:44):
She has a high paying job or enjoying life using the money to generate
happiness, not just some kind of
dynastic.
Yeah, go ahead, Annika. Thank you, Andy. Yes, actually
too, I want to add to what Tom said. I totally
agree. We know that many investors know that long

(24:05):
term investing is better than panic selling and they
still do it. And investors understand the importance
of diversification and they know about loss aversion.
However, when it comes to really working on it,
I just found out myself when I was teaching a class and
we had presentations and the presenters mentioned

(24:27):
a stock and that if you have that one in your portfolio, you should
have sold it already like ages ago because it's not coming back. And I
was sitting there and thinking, actually I'm the one who has this stock
in the portfolio and even though I know that it's not
coming back and I shouldn't be holding on to it because I'm,
I have a high opportunity cost in just investing

(24:51):
the rest that I have into a better performing stock since I
did not talk to anyone before and I did not make the plan before and
I'm still just hoping, I have been holding onto it and I'm
a big fan of do it yourself investing, but be
sure that you make a plan beforehand and maybe
implement the savings plan, not look at the stocks if you are looking

(25:14):
at zoom out, even though one of them might be
performing badly, others might be doing
great. And so it's fine to just, you know, cut your losses
and invest into into a better performing
portfolio. And if you cannot do that, it's really helpful
to get someone like a financial advisor, financial coach

(25:36):
to be on your side and to be your sounding
board and also to help you just go through with
it in a more objective way.
Megan, I want to go to you before you have to leave. Yes, I just
want to echo what Annika shared. I think one of my favorite
quotes about stock of all time was when Warren Buffett was asked after the

(25:58):
2008 crash, how much money did you lose during the Great
Recession? He said none. He had made a plan and had
diverse stocks and had a long term time horizon
that allowed him to weather the storm. And so I hope listeners
and investors find ways to create a plan and
controls to keep the emotions out of those investment decisions and play

(26:20):
the long game instead. Thank you so
much. It pays to be Warren Buffett. The
experience and also he
gets access to some very good attractive
deals. Let's go to the next segment.
Investors often rely on intuition, but structured decision making

(26:43):
frameworks can improve rationality and reduce costly
mistakes. Prospect theory explains how loss aversion
influences risk taking risk, causing hesitation in seizing good
opportunities and reluctance to exit poor investments.
Reframing losses as part of a long term strategy can help
overcome this bias. Bounded rationality suggests

(27:05):
that investors make decisions with incomplete information, often
settling for good enough choices rather than optimal ones.
Decision support tools such as investment checklists and
systematic strategies can improve clarity. Mental shortcuts
or heuristics simplify complex decisions but often lead
to errors. Availability bias causes investors to

(27:27):
overweight recent news, while representativeness bias
leads to false pattern recognition techniques like pre
mortem analysis, anticipating worst case scenarios
help investors prepare for uncertainty. By adopting
structured frameworks, investors can make more disciplined, objective
financial decisions.

(27:52):
Colin, the headlines these days grab a lot of attention
and have an impact on financial markets. What are some
effective strategies to improve decision making under
uncertainty? Well, first of all, stop
doom scrolling which which I often
do. I think taking A

(28:13):
couple of people mentioned taking the long view. So I think we
have a Danny Kahneman used to say nothing is as important
in the long run as it feels like in the moment. So no
matter what dramatic thing will happen, some dramatic thing will happen today in politics or
maybe tariffs or the markets or GDP
adjustment a year from now, it will just be a blip on a

(28:36):
chart and I don't know what
therapeutically the right way to get people to think that way. I do think by
the way, aging helps in the sense
that the peak for most of our sensory motor things
like hearing and eye
coordination is around 25 years old. So when you get to be

(28:57):
65, which I am, all those things are degraded.
But one good thing, the silver lining is that in general people
get better at emotional regulation, at not letting small
things bother them. And so I don't know how
that it works as advice, but it just means if you're an
anxious person, your 20s and 30s, decades later you might be less

(29:19):
anxious about money. And I just want to echo what everyone said about having a
plan. If you have a sort of, you know, a plan for what happens
if something goes down by 10% and you're kind of prepared to sell it,
then in terms of reference points and psychological dynamics, it might be a lot
easier to actually execute that sale.
Yeah, it helps to have a long term approach. It

(29:41):
helps to think about taking your time and then also
maybe thinking about your 50, 60 or 70
year old self to make more balanced decisions.
Annika, do you have stories of
helping clients to shift from making an emotional decision to
having a more systematic approach and a better planned approach?

(30:05):
Yes, that's what we generally do to make
a plan in the beginning to
talk about and evaluate their
risk, their risk
tolerance and decide together on the
portfolio they can invest in, but also

(30:28):
to make a plan what happens. But I would like
to echo also what Colin just said. So there
have been studies on the effects of news on
investments. And one of them, I remember
there were two groups and one received news and the other did not. And the
group that did not receive the news, they

(30:50):
outperformed. And the explanation here is actually
that investors often feel the need to react when they receive
news and oftentimes they are completely
irrelevant to the long term performance. So when we talk
about this with clients, it is again what Colin just said. Stop doom
scrolling, stop listening to the news. They are often writing something

(31:12):
to sell a story and not actually to,
to help you. So that's something that, which
we discuss. But oftentimes people call when the
market tanks and to ask what should I
do? And that's when we're talking. Be like, look, look,
zoom out and see what the market has been doing over the past

(31:34):
50 years. And there are always small dips. It's not a
linear way up. Look at the small dips. That's one
of them. We are just in it and we hang in there and we keep
on going. Tom, tell us
what you've learned working with both advisors and clients to
keep them on track. Yeah, that's really a

(31:56):
challenge. The advisors, our best advisors, are one
again that developed a plan use the bucket
approach so that the only part
where volatility has an impact is in their long
term portfolio. And by and large you should ignore
that. I always like the

(32:18):
expression what goes down must go up. If you look
at the history of the stock market, that's been the case. The
average drawdown in the stock market on an
annual basis, max drawdown is 14%.
But over that same period of time, the stock market generated a
12% annual return. Which says if you paid

(32:41):
attention to the drawdowns and did something, you
missed that opportunity for a 12% return.
So, yes, I think the others have betched, let's, you know,
quit listening to the news. The way I like to say it
is when we manage portfolios, I'm from Denver and I, I've
always liked the Denver Broncos, so I read every story I can

(33:05):
about the Broncos, but I never use any of
that information for making my investment decisions. And that's the
case I use for almost everything else. I'm background
economist, love economics. I read everything I
can, but I have a very disciplined approach to
managing money and the things that are important

(33:26):
to keep track of. The rest I read about. It's interesting,
but I don't use it for making the investment decisions.
Colin, can you comment on mental shortcuts or heuristics
and like, what are the most common heuristics that investors use and
how can they avoid being misled by them?

(33:48):
I think, I think one that's, well, you reeled off a whole
bunch. Confirmation bias and overconfidence are important when you're thinking about
either the entire market or your whole portfolio or say individual
stocks or individual housing. Taking a long view
is not hard. And I should add,
you know, I don't work with clients and so forth. I'm just a professor in

(34:10):
the ivory tower. But
there's more and more technological tools
to, to help you discipline your mind and to sort of
shape the information that gets in front of you than ever before.
So if you're, if you, if you go through a certain amount of
therapy or work with an advisor and think, okay, I want to be more disciplined

(34:33):
about my money, I want to create buckets and so on, there's a million ways
to actually do it without having to have like jars in
your house, you know, that have cash in it for the rent and cash for
movies like 70 years ago.
Let me say one other thing which is I think one of the most pernicious
cognitive biases. I mean, it's so built into human memory, it's hard to even call

(34:54):
it a bias. It's just a natural way that our memory works is hindsight
bias, which means after something occurs, our recollection
of what we thought about it is biased in the direction of what happened.
There's a zillion studies on this. It's really robust
statistically, it's one of the strongest things.
And that also fuels regret.

(35:16):
And if you could expunge hindsight bias like
with a pill or electrical stimulation to the brain, it would
be great because hindsight bias does almost no good and
increase this illusion of predictability and it fuels
regret. So if you can kind of discipline yourself
to, I mean, there may be tools that could actually do it. For example,

(35:38):
you keep track of your, like what you think is going to happen about certain
important events. Is there going to be a. Is my house going to go up
in value? Is there going to be a crash in the stock market? And then
you go back and look at those that might be a kind of cure for
hindsight bias. And the reason I mentioned this again is that it's a
really irresistible thing. It's just how our memory works. We kind of partially overwrite

(36:00):
what we thought before and we replace what actually happened with what we
remember having thought would happen. And it generates all
kinds of regret and things like over testing and medical over testing because of
people. If the doctor makes a mistake, you think they should have
known better, even if they shouldn't have. And it has all
kinds of ramifications. Annika, I see you nodding

(36:22):
yes, yes. Especially the hindsight bias and
that it fuels regret. I know it personally, but I also, that's
something we talk with clients a lot
and obviously with clients I don't
go the academic route there

(36:43):
novelly like approach it with kindness towards yourself. And
since you are now in this situation, we are talking about things,
you are thinking things through. You try to make the best
decisions right now. Trust that you did that also in the
past and know yourself well enough that
if you had known better, you would have taken or if you would have known

(37:05):
differently, it doesn't even have to be known better. If you would have known
differently, you would have taken different choices. So trust yourself that you took the best
choices with the, with the information you had at that point
to. Yeah, to not constantly regret. Otherwise we are always
living in the past, regretting which decisions we've taken,
especially with money. Yes, yes,

(37:28):
yes. And it goes in both ways, right? It's why did
I not invest into xyz?
Or why did I not invest more into xyz? Because now I
know it's gone through the roof and either way you should be
fine with what you did and adjust when you
know differently. I want to say

(37:50):
thank you. Let's go to segment four. Social
forces and media narratives strongly influence investment
decisions, often driving irrational market movements.
Hurting behavior occurs when investors follow the crowd leading
companies inflated asset prices or panic driven sell offs. The
gamestop rally of 2021 showcased this phenomenon

(38:12):
as retail investors coordinated through social media to push
prices beyond fundamental value. FOMO, or fear of
missing out further fuels impulsive investing. As hype
driven markets create pressure to chase trends. Media
amplification of market movements can distort investor perception,
making short term fluctuations seem more important than they really

(38:34):
are. Contrarian investing challenges this dynamic
by prioritizing independent research and long term fundamentals
over collective sentiment. Strategies for resisting herd
mentality include reducing social media exposure,
setting clear investment goals, and maintaining a disciplined,
diversified portfolio. Understanding the role of social

(38:56):
influence helps investors stay focused on rational, data
driven decision making.
Colin this, this segment plays into what you were talking about
earlier with bubbles and
irrational exuberance and how it, how it plays out in our

(39:18):
brain. Yeah, I think this is an incredibly interesting
topic and I will say also that
Bob Shiller in his books and writing about irrational exuberance,
talked a lot early on, I think in the late 90s about the
importance of social forces. Like when the stock market's going up, people are
talking about it at work, they're comparing notes, said, are you invested?

(39:41):
Oh, my neighbor bought Apple and it went up
100%. And so there's a big social
influence effect. But in academic finance,
at least in the high profile journals, it was completely
neglected. The models don't have any hurt behavior in it.
But David Hershleifer, who's a neighbor, Southern

(40:02):
California neighbor at usc,
has been championing the role of social forces. Now it's
an actively studied academic topic. That's good news.
I think that it goes back to some, some things that Tom,
Dr. Howard was talking about, which is
herd behavior is part of our normal healthy

(40:25):
functioning to be sensitive to what other people are doing, either
because it may give us information about what the right thing is to do, or
there's safety in numbers or something of that. So it's very hard to resist.
I think the advice of consume little social media or
do like Tom mentioned, which is read about the, the Broncos all you
want, but but don't gamble, right? Or don't, you know,

(40:48):
don't put your money on the line. It's a good idea. And the
other thing is to, you know, even though we
have this explosion of social media and information diet, but you can also curate your
information diet quite reasonably. So
figure out what your herd is or what group of people you think
identify with you and think like you about the long run and the short run

(41:10):
and alternative assets or whatever it is that's central to, to your financial
thinking and make that your hurt and then at least you're a
little bit immunized by others. Final thought, which is one of my
favorite Warren Buffett sayings is when people are
greedy, be afraid and when people are afraid, be greedy.
And essentially what he meant was try to be in a kind of

(41:31):
emotional contrarian. And of course not everybody
can do that. And it's hard. You almost have
to shut off the, the natural instinct and all this neurocircuitry that says
a lot of people are doing something, why am I not doing it? But I
think in the therapeutics you could kind of distinguish between
am I doing this just because other people are or for some other reason

(41:53):
and hope that maybe asking that question in a disciplined
way or thinking it through with a financial advisor or even
a spouse could be helpful.
Say that there's only one Warren Buffett for a reason
he's willing to in decisions

(42:14):
when it's very hard to do so. Annika, how do you help clients
make those independent financial choices rather than
following. What everybody else is doing,
curbing their overconfidence. Exactly what you just
said. There's just one Warren Buffett for reason. And on social media
I see it so often, it's we

(42:36):
are motivated to listen what
Warren Buffett is doing and how he approaches things.
And I think we are
basically told that we should do the same. But no, we
are most likely not as special.
So just stick to, to the market return

(42:58):
and invest into a diversified portfolio and
stay out of it because it shows over and over again. If we
look at the statistics, the market returns on average
some S&P 500, somewhere between like
9.69%, something like that. And if you look into
the individual investor, the individual investor

(43:19):
gets an average of 3.5% or something like that.
So just stick to the market and don't try to outperform
it because you will be unsuccessful, most
likely. Tom, in 35 plus years experience
in academia and money management. Do you have any
stories to share of falling victim to the herd mentality

(43:41):
or successfully steering clear of it?
Generally I've stayed steered clear of it. I'm kind of an odd duck
in that regard.
Let me respond to Annika what what she was talking
about. The reason individual investors
underperform the market is myopic loss aversion. They tend

(44:04):
to sell when the market has gone down and don't get back at the right
time. Those there is an
argument for staying in the index portfolio
for that reason and never looking around. But there's
tremendous opportunities to earn exceptional returns which
we have done and others have done in active management.

(44:28):
And again, it's got to be a disciplined approach.
You've got to do careful research and decide what
you want to invest in. And then
the sell decision to get is has got to be automated. Another
thing we see this is really frustrating as a professional manager
when you think the professional should be better than the individuals in this

(44:50):
regard. They're no better. So we go out, we have
a rather unusual set of products. So we go out and talk to potential
investors and the one of the first questions they ask is
so who else is invested in this? And I go
okay. And for example,
in hedge funds for years, hedge funds,

(45:15):
people, when they make investment decisions, they go, they put their money
in their largest hedge funds. Well, the research showed that the smaller hedge
funds, and that's true in the area in which we operate,
outperform, they do better. But
you don't have as many investors as the big people do. So there must be
something wrong there. Why are.

(45:37):
No, why are not so many people in your fund
and there's millions in these other funds. So that
herd mentality plays an incredibly important role in
professional management as well. Huge. Yeah,
herd mentality and risk aversion. People don't want to take a risk.
Tom, why do you think that the smaller hedge

(46:01):
funds perform better than the big ones? Do you have
any data on that or any guesses? There's three
things that. Cause we always say behavior is more predictive than
past performance and the behavior of a fund that's
successful and narrowly defined strategy. We don't
want specialists. We want, I mean we don't want generalists. We want specialists.

(46:23):
A narrowly defined strategy pursued consistently
in taking high conviction positions. So in other words,
you want to be different than your underlying benchmark or your
index. Those three things, those three particular behaviors
are predictive of better performance.
What happens of course, when you're an Active equity manager like we are is

(46:45):
you always have periods of underperformance. That's just the,
the nature of the, of the animal. And what do, what are investors
do? Myopic loss aversion or, or performance chasing.
They sell you and they buy the one that has outperformed. That's a
recency bias problem. That's outperformed.
And so there's a strong incentive

(47:07):
among particular mutual funds and, and hedge
funds too to become closet indexers. So
if I am successful and I've attracted investors, I then
turn into a closet indexer. So I can't underperform so people
won't leave me. And that is a huge problem
in the industry. And the reason that the

(47:30):
active universe has on average
underperformed the indexes is because of
closet indexing. The vast majority, what so called
active funds are really closet indexers.
So those are the dynamics of the industry.
Yeah, I was going to just add, I think there's some evidence

(47:52):
for sports betting about this principle of specialization, not generalization.
So I used to bet on horse racing a lot.
Not pathologically most of the time and not
successfully most of the time because the house has a
50% advantage against you. And when you read about
professional gamblers, a lot of them have

(48:14):
exactly this strategy. So there's somebody who says I'm just going to study
turf racing at Santa Anita and other Southern
California tracks and I'm, and I'm only going to study two year old
fillies and which are young female horses and
know everything there is to know about that. There's a, there's one better who would
go out in the morning and he would walk around the track and kind of

(48:35):
get a feeling literally for the soil and blah, blah, blah.
And, and there you might have a chance, right? Because most people,
the track are not going to be so hyper specialized in a particular type
of racing. Right. They're kind of reading this Wall Street Journal.
And the other thing investors do is, is about conviction
is don't make every bet. You know, the,

(48:58):
the wise sports bettors might bet, you know, there's 24 NFL
games on, on Sunday and they might bet one game or they might bet once
a month. But figure out when you think you have a really big edge
and to the point about small hedge funds and large, the large hedge funds
in a sense kind of have to be constantly betting
whereas the small hedge funds have the luxury of being able to be more

(49:21):
focused on an asset class or an emerging market or something where
they think they can really learn a Lot that isn't priced in.
Yeah. And I'll add to that that, you know, in business, there's economies
of scale where size helps you, but sometimes when you're managing
money, if your assets become too large, it
becomes harder to find

(49:43):
investments where you can actually generate alpha. When you're smaller, you're just more
nimble. Exactly. Take bigger bets and, yes,
make quicker. Bets, but the problem is you're small, so
why don't you have more people there? And. Yep,
so it's, it's, it's the challenge. The gatekeepers won't give
you, they won't allocate you money because it's too much

(50:06):
risk for them to stick out their neck. They all want to bet on the
same horses, so to speak. Yeah, it's a professional
risk. Exactly. If I may take
a small tangent, I've been getting a lot of calls from clients
this week about tariffs and the impact on the
market. And I just wanted to ask the economists in the

(50:28):
room, can you walk us through how
expectations about tariffs might impact
market outcomes and how investors may incorporate these
insights into their strategies? So
there's no economic argument for
tariffs. They make, they make

(50:48):
absolutely no sense from an economic standpoint. And you know, David
ricardo did that 200 years ago.
And so, you know, economies, economics and
economists can't argue for tariffs at all.
Of course, Trump, the way he's doing it, he's playing a bit of a game.
He says, I'm going to threaten you tariffs and then I want you to

(51:10):
lower your tariffs. So it, predicting it,
it's more like, what's Trump going to do? Is he going to
actually go forward with the tariffs or not? And
so that's, that's really what you've got to predict. And, and there's really
no way of knowing what that is. Yeah,
yeah, I totally agree with Tom. This is, it drives me crazy when there are

(51:32):
headlines, that politician suggests tariffs
may be good. Some economists disagree. No
economists disagree. All economists disagree. It's
really, it's a deeply well worked out thing that goes back ages
of the discipline to Ricardo, as Dr. Howard said.
And the other thing that's kind of good news if you think tariffs are bad

(51:56):
and we'd like to see them unwound, is the impact happens
very quickly. So first of all, markets really look ahead.
Right. So as soon as, I mean, you can actually see on media,
during one speech, you could actually see in the corner, the stock market
was falling a little bit from like minus 0.9%,
minus 1.06%. As, as

(52:19):
the former president, the president was talking. So the markets are
really looking ahead. The markets are, you know, know
a lot about tariffs. People understand the macro implications. And
the other thing is the price changes may happen extremely quickly. Right. Because
the tariffs are paid by the importers and they typically want to pass them
through 100%. I mean, they'd rather not have tariffs, but if they do,

(52:41):
they want to pass them through to customers because
there's no slack in the price to absorb it. So the
negative impact of tariffs I think we may see very
quickly because the stock market's essentially a
forecaster, and you could also see that
in various segments. So some segment that's going to be hard hit by tariffs,

(53:03):
which might be housing starts. You know, you're going to see housing start,
stocks might fall if we can't import lumber from Canada and what have
you. Yep. So there's a kind of early warning system
that's, that's available about the
likely negative impact of tariffs. Any
insights from your game theory

(53:25):
research? If it's just being used as a.
It's a chip. Right.
I think Trump fundamentally doesn't understand
the economics of tariffs, that it's a tax. He
thinks it's a tax on China or on Mexico. I think he just

(53:45):
doesn't. So that's a danger. That's a
danger to the market and to investors. It's certainly to the world.
Yeah. And in his first. I don't want to get too deeply into the politics.
We all have our own views. But in his first term, he was also restrained
on a lot of these things by others. Like he, you know, he had the
same ideas about tariffs, but people were advising him. He just knew more. He had

(54:07):
better economists working with him, saying no. And now there's just
much less restraint. So it goes right from his
social media feed into policy.
Oh, go ahead. Let me respond to that, too. I
had with, had lunch with friends the other day, and one guy kept
saying, trump certainly has some smart people around him. It'll talk him

(54:30):
out of this. Well, the evidence the other way,
it looks like, it looks like everybody around him believes the same thing
he does. And I'm, my poor wife, we sit and watch
the news and I say, this is so terrible. I can't
believe they're doing this. And everybody around him
spouts the same thing. And, and some of the anchors on the

(54:53):
news channels spout the same thing. And I'm going, what is
going on here? Am I correct to assume
that tariffs make even less sense? I mean, they did not
work in the 1930s, but today, because
we have a more, we have globalization, we have
outsourcing to lower cost countries. Right. From

(55:15):
developed countries. Does it make less
sense even today? Yeah, yeah, I think so. It's also very difficult to actually
administer them because if you build a car in Canada versus
Mexico versus the US a lot of the parts came from Japan or
from China or from Finland, and it's hard to even know
what it means to tariff the country

(55:38):
that's originating all the parts. And there's also a lot of
workarounds. Right. So there's a, a lot of what used to be made
in China, like garments is now made in Indonesia,
Vietnam, even Cambodia. So there's lots of places, if you
place chairs on China, on China,
the Chinese will just go and set up plants in Cambodia.

(56:01):
So there's a kind of a game of whack a mole. And you're absolutely right,
I think, Andy, because the globalization is so thorough,
there's such a network, it's even hard to know, you know,
what tariff effect would actually have and would it even
persist and so on. It's just a, it's never been a
good idea. It was not a good idea then. It's an even worse idea

(56:22):
now. Exactly. And they, they talk about local
content. What a, what a joke that is, right?
If you follow the supply chain on a car, there's, you know, tens of
thousands of parts and they come from all over and sometimes they
go into the United States and then out of the United States and then to
Vietnam and back from Vietnam.

(56:44):
It just, it's just a silly game
and. Sorry, go ahead.
Sorry. Yeah, and people think that it helps
the, the, the local producers
to, to sell more products and that these products
stay cheap in comparison to the terrace. But I've

(57:07):
seen it in Brazil, where I lived for
half a year, that actually the prices of the locally
produced goods go up just underneath
of what the, exactly what the
products that are imported cost. So in the end,
the people have then the choice oftentimes between a

(57:29):
product that has worse quality is just
a little bit cheaper than something that has been
imported with, well, probably a little bit better
quality because it has, you know, all the parts from, from, from
all over the world and the input from there.
So I, talking about, I taught international

(57:51):
finance for years and I used to say international
trade, it's widespread gain and
focused pain and Trump is responding to
the focused pain and so
the widespread gain that
is diminished by doing tariffs. And I

(58:13):
used to say to my class, and I had A lot of Chinese students in
my class and I used to say to the American students
says, have you ever written a thank you note to China? When you
went to Walmart and looked at it, it was made in China and really inexpensive
and they all went, oh, I would never do
that. Good point. Yeah, there

(58:35):
are, there are American retailers who have had very large margins,
very profitable, because they've been able to make
cheaper products overseas. Thank you for indulging my
questions and answering them. Let's wrap it up and go to the last segment.
Understanding behavioral biases is one thing. Overcoming
them is another. Many investors struggle with impulsive

(58:57):
decisions, panic selling and chasing trends, all of which can
derail long term financial goals. The key to smarter
investing is creating systems that reduce emotional influence
and encourage rational decision making. One effective
strategy is automation, using tools like dollar cost
averaging and robo advisors to remove human error from the

(59:19):
equation. Setting clear investment rules such as predefined
entry and exit points helps maintain discipline.
Regular portfolio reviews ensure that decisions align with long
term goals rather than short term emotions. Another
powerful approach is mindfulness. Acknowledging emotional triggers
before acting on them. Keeping a decision journal, seeking

(59:41):
diverse perspectives and practicing patience can improve investment
choices. By focusing on strategy over instinct,
investors can build resilience, minimize costly mistakes,
and stay on track for financial success.
Tom, we talked a little bit about some of the tools and

(01:00:04):
technology available today that can help us.
Do you see automation tools like robo advisors
as a way for investors to kind of reel in their
emotions and do a better job execution wise? Actually,
I don't. I think you need to have
an advisor. I mean, the robo advisors

(01:00:27):
play their role and they can automate some of the process. But the most important
thing is the behavioral coaching. So to
avoid those emotional mistakes, you
need to set up kind of this whole series of
barriers. One is put together a financial plan.
Two, decide what you need in each of your buckets,

(01:00:50):
the liquidity, the income and the growth.
The growth portfolio is your long term
portfolio and you shouldn't be responding to short
term events in that particular particular
portfolio. And then from a
financial advisor standpoint, it's the, it's the counseling. It's

(01:01:11):
a behavioral counseling. And we, we work with lots of
advisors. We have some really very good advisors.
And it's predictable when their, their clients are going to start
calling. In fact, our best advisors have done such a good
job that when the market crashes, their advisors haven't
called them because they know what the advisor is going to say

(01:01:34):
and they believe their
advisors. And then on the
Investment side, as we've talked about, strategy, consistency,
conviction are the key behaviors for
superior performance. And then
very disciplined

(01:01:56):
rules for making investment decisions, particularly in the selling
decision where what, what is the criteria and regardless
of what's happening, if, if it triggers that particular signal, then you
go ahead and sell. So those are the, you, you basically
protect yourself from your emotions and building it out that
particular way, right? Rules based decisions. Yes.

(01:02:20):
Annika, mindfulness and self awareness play a
role in better decision making and financial decision
making. Any practical exercises that you recommend
to people for, especially if they're struggling with emotional
biases? Yeah. Take a
deep breath and remove yourself from the situation.

(01:02:42):
Especially if people feel physical,
feel their emotions, physically step back,
go, go out for a walk, you know,
well, obviously meditate or something like that, but I feel that
oftentimes it's not very practical during the day,
but breathe slowly

(01:03:05):
and I, apart from the
mindfulness there and writing for example, a journal and those kind of
things, I do say that, but I'm personally
not the person to sit down and meditate during the
day and, and, and write everything down in a journal.
I really think, and that's what Tom has said and also Colin has

(01:03:26):
said that's where the advisor comes in, that's where the coach comes
in and that's the beauty of, of our job. I
think also when people talk about AI and everything taking
over, AI can tell you the same things, but it cannot
really hold your hand so far. And
really having a trusted person that coaches

(01:03:48):
you through and stands by your side, I think that is an absolute
game changer. Colin, neurological
research shows that habits shape behavior over time. How can
investors rewire their brains to adopt better financial
habits? Oh, that's, yeah, that's a great question.
And actually if you read my mind, it's a,

(01:04:11):
I can end on a point I think I wanted to make that hasn't quite
been brought up. Which is one of the most basic
principles of good personal financial planning is to start investing
early and taking advantage of compounding.
So for biological reasons that I think are pretty
deep seated and old and have to do with evolutionary mismatch,

(01:04:33):
people just do not appreciate the power of compounding. It's, you know,
it's amazing. It's like we have this linear model of how things grow
and it doesn't, it doesn't capture all the takeoff of
exponential discounting. So the
solution is very simple, which is start investing a small amount of money
early on a regular basis. You know, if you're, if you're

(01:04:55):
not well paid, take out $10 a month. If you're better paid, take
out 50 or 250 and just like set
it and forget it. I mean, it's a really simple thing to do as long
as you can, you know, afford that little bit of savings. And of course lots
of employers will kind of do that for you through 401k. But you can start
to do this when you're with my son. We started when he was 8 years

(01:05:16):
old, I think, as well as setting up his college fund which is
tax advantaged. Let me end with
a story about this, which is a good friend of mine, Keith Weigelt, who's a
professor at Wharton Business school for about 10 or 20 years, has been
teaching lower SES families in West
Philadelphia about basic financial planning, having a bank

(01:05:37):
account, avoiding overdrafts. You know, a lot of
them don't have bank accounts and they can't. And the consumer banking
is expensive if you don't have a certain minimum balance. This one.
And he told me recently that he's now he's working with the Sean Carter
foundation, that's Jay Z, to support financial
literacy teaching in HBCUs and essentially expanding his scope

(01:06:00):
from Philadelphia to lots of other places where people need extremely basic
personal finance advice. And he mentioned the following,
which was mind blowing to me, which was a lot of his
clients have kids who enter the
juvenile justice system for one reason or another. So they may be a 50 year
old kid who's going to spend two years in juvenile detention

(01:06:22):
and some of them are in prison. And
I mean, it's ironic as can be, but the advantage
of prison is you can't waste money, right?
So if what the prisoners are doing when they're in there at age
16 or 18 or 19 is for five years
somebody is investing money on their behalf, right? They're not going to take

(01:06:44):
the money out and squander it, right? It's just going to grow and grow and
grow. And so in a way, even though being incarcerated is
horrible, it gives them this protection from the temptation of
grabbing their money out of the bank. So I think that's just an example
of, of a particular draconian
automation. But saving a

(01:07:06):
little bit of money early is such a simple thing to
do. And there are lots of fintech companies are working on
this. Most commercial entities would love to open, you know, bank accounts for
kids with a parent signing at almost any age
and just watch it grow, grow, grow. So he spends a lot of his time
just showing people compounding charts and ask them to guess how

(01:07:28):
long do you think it will be before this doubles or 20 years from
now? How much would it be? Just kind of pounding in, like compounding is your
friend. Compounding is your friend. So it's a simple lesson,
you know, it's 101, but somehow it's just getting
to depreciate the power of compounding. It's just a pedagogical thing and
it's so low cost and good for people. Huge one,

(01:07:51):
as they say. Compounding is the eighth wonder of the world.
And there are some policymakers who are advocating
for forcing citizens
to invest a portion of their salary so that
it's not a 401k and optional and you don't have an employer
providing the plan. It's what if the government made

(01:08:12):
you and forced everybody to invest regularly
into an account and then through compounding, it's really
significant over time. Annika, you had something to say. Yes, exactly.
So it is obviously the compounding. But as Colin has said
before, the more seasoned an investor
is, the less emotionally attached

(01:08:34):
this investor is. So if you also start early and with
small amounts of money, not having as much at
stake, it teaches you to detach
emotionally from your investments and to become a better
investor. Yep.
Save. Investing early and often is a great habit to develop

(01:08:56):
and it pays you handsomely. Any
closing thought, anyone?
Yeah, so somebody. I had a lot of
undergraduate students come in and talk to me and my
recommendation was that they, when they
get their job, take 10% of their salary and put it into a

(01:09:17):
self directed IRA and
invested in SSO, which is the double
levered Standard Poor's 500
and never look at it. And when you
reach 40 or 50 years old, you'll be a millionaire.
And it, it's just incredible. If you look at again, that's,

(01:09:40):
that's compounding on steroids because it's levered
and it just generates tremendous wealth. People have the hardest time, of
course, staying with that, not looking at it, but if you
did that, you'd do very well.
I think that's a great place to close. It's been a

(01:10:01):
fascinating discussion. If there's one thing that I took away from this conversation,
it's that we're all wired to make bad
decisions and bad financial decisions. But recognizing
our biases is the first step to making better decisions.
And whether it's FOMO pushing us into a frothy stock
or loss aversion that keeps us stuck in a losing investment,

(01:10:24):
our brains can be our own worst enemy when it comes to money. But
the good news is that we can outsmart ourselves. So
thank you to our panelists, Colin, Tom, Annika,
Megan, for sharing valuable insights and strategies to help
us overcome these biases. And one that really stuck
with me is having a decision making framework in

(01:10:47):
place, having a plan so that it's not
just your emotions kicking in, that you have an exit
plan for a stock or an investment so
that decisions can be made when you're calm and that you can
stick to that plan. In my work, we look at
financial markets using an METV discipline, which

(01:11:09):
stands for monetary, Economic, Technical and value. It's
a diffusion index of over 40 variables that helps us to
evaluate and make decisions about where we are in the market
cycle, and it allows us to be methodical and avoid
making impulsive decisions. So if I may
give an assignment to all our viewers and listeners, here's what

(01:11:31):
I here's what I want you to do the next time you're about to make
an investment decision. Pause. As Annika said,
ask yourself, is this a decision based on a solid strategy or is it
driven by emotion? And write it down. Write down your reasoning
before taking action. And even just becoming aware
of your thought process can help you to make smarter decisions decisions

(01:11:53):
and smarter choices. Let's start investing more intentionally
and less emotionally. And let me know in the comments. What's one
bias that you've noticed in your own financial decisions? If you found
this valuable, please share it with someone who would benefit
by sharpening their investment
skills. And don't forget to subscribe so you never miss an episode of

(01:12:15):
Inspired Money. A shout out to the Inspired
Money small but mighty team. Excellent segment edits by Bradley,
our producer, and graphic animations by Chad
Lawrence. A big thank you to all of our panelists.
Be sure to follow them. Colin Camerer
Robert Kirby, professor of Behavioral Finance and

(01:12:37):
Economics at Caltech. You can find him at.
I think it's https://hss.caltech.edu, which
is the Division of Humanities and Social Sciences. You
can find tom
howard at athenainvest.com Check out
his books. One is Behavioral Portfolio Management.

(01:12:57):
You can find Annika at
Echati.Finance and Dr.
Megan McCoy who had to leave earlier. You
can find her at
https://hhs.k-state.edu.
That's the Kansas State University website.
Thank you everyone for joining us. The next Inspired Money

(01:13:20):
episode will be Retirement Income Strategies Maximizing
Returns for Financial Freedom. We'll be back next week. Until
next time, do something that scares you because that's where the magic
happens. Thanks everyone. Thanks for having.

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.css-14f5ked{margin:0;word-break:break-word;display:-webkit-box;-webkit-box-orient:vertical;box-orient:vertical;-webkit-line-clamp:2;overflow:hidden;}Understanding Behavioral Finance: How Emotions and Cognitive Biases Impact Investment Decisions