Insights into behavioural investing
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Insights into behavioural investing
Have you ever made an irrational or impulsive purchase you’ve later regretted? We all make decisions based on our emotions or personal biases, but when it comes to investing, such mistakes can be very costly.
What is behavioural investment?
Behavioural investment is an approach that acknowledges how our emotions and our biases can sometimes make decisions for us. During periods of geopolitical uncertainty and heightened risk, behavioural investment biases can become even more pronounced, tempting you into making poor decisions. Here are some impulses that often lead to bad investment decisions:
- Loss aversion: Investors worry about their investments falling further in value, so they sell them prematurely, locking in losses and missing out on potential rebounds
- Herd mentality: When markets fall, people tend to panic, follow the crowd and sell their investments. This ‘herd mentality’ means markets keep falling, as more people panic and sell, creating a spiral
- Confirmation bias: Investors let their own opinions dictate their actions and often seek out information that confirms their existing fears, ignoring evidence that contradicts their own impulses
- Overconfidence: Some investors believe they can predict the market’s reaction to geopolitical events, leading them to make risky bets that could ultimately backfire.
Avoiding behavioural biases
Investors often need to worry less about geopolitical events and more about avoiding making poor decisions. Worry not, you’re in safe hands. We can create a plan and stick to it, so we focus on longer-term goals, rather than risk getting distracted by short-term noise. We will build a resilient portfolio, spreading your investments across different asset classes to manage risk. Rest assured, we will make well-considered, researched investment decisions to increase your chances of achieving your long-term financial goals.
The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.
It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. No part of this document may be reproduced in any manner without prior permission.
The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. If you withdraw from an investment in the early years, you may not get back the full amount you invested. Changes in the rates of exchange may have an adverse effect on the value or price of an investment in sterling terms if it is denominated in a foreign currency.
Information is based on our understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change.
Tax treatment is based on individual circumstances and may be subject to change in the future.
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