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The Stan Clark Financial Team

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Behavioral finance

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The Stan Clark Financial Team’s Perspectives on

Behavioral Finance

Key Readings

 

Behavioral finance explores the relationship between human psychology and financial decisions. Successful financial planning and investing often requires going against the crowd and against some of our most deeply rooted human emotions. Our approach and philosophy, built on the lessons of behavioral finance, help us do that.

As you read the story below, you’ll get an idea of what is wrong with most investment methods, how human psychology constantly leads us into making mistakes that cost us money and what you can do to avoid those mistakes in order to outperform long-term market averages.  Read Stan’s story about investing and how it relates to Behavioral Finance

 

How emotions and biases affect our finances

One of the most fascinating things ever to happen in economics was when an ingenious psychologist, Dr. Daniel Kahneman, decided to study it. In 2002 he won the Nobel Prize in economics for “having integrated insights from psychological research into economic science, especially concerning human judgment and decision-making under uncertainty.” Kahneman actually created a new discipline, Behavioral Finance.  Learn more

 

Perspectives articles by topic

Written by Stan Clark

 

Our articles on behavioural finance

Our natural human addiction to prediction   Read / Watch / Transcript

Fooled by randomness   Read

Investors, be wary: Our intuitions don't have a feel for probabilities   Read

Trust your instruments over your senses   Read

Lake Wobegon, where all investors are above average   Read

More information increases confidence – but what about accuracy?   Read

Avoid confirmation bias – be open to contrary evidence   Read

Confirmation bias is normal – but dangerous for investors   Read

Anchoring: When to hold on – and when to cut free   Read

How the framing phenomenon affects your key financial decisions   Read

The siren song of stories   Read

Don't let the investment herd trample you!  Read

How to avoid fear-based ‘herd' behaviour   Read

How hindsight can hurt your foresight   Read

How the news can hurt your investment decisions   Read

Mere-Exposure Effect: How familiarity affects your financial decisions   Read

CAUTION: Biases won't disappear just because we know about them   Read

Learn from Ulysses to improve your investing   Read

Five tools to avoid the pitfalls of Financial Sirens   Read

Thinking: We're of two minds about it   Read

Be wary of the words "This time it's different"   Read

The Restraint Bias: How much control do you really have?   Read

The Money Illusion: How inflation threatens what today's money can buy in the future   Read

The Cluster Illusion – Seeing trends where there are none   Read

How rational are you?   Read

Trust your intuition? Sometimes – but not for picking stocks   Read

Beware of cognitive dissonance: It undermines facts, leads to poor investing decisions   Read

Can professional managers be fooled by ‘herd behaviour'?   Read

Luck and the illusion of stock-picking skill   Read

The planning fallacy: How optimism can lead to poor investment decisions   Read

How loss aversion and the endowment effect influence your financial decisions   Read

What behavioral finance tells us about making judgments – even expert ones   Read

Superforecasting: The Art and Science of Prediction   Read / Watch / Transcript

Superforecasting: What makes good forecasters different? (Part 2)   Read / Watch / Transcript

Superforecasting: Philip Tetlock's first five commandments (Part 3)   Read

Superforecasting: Tetlock's next six commandments (Part 4)   Read

Superforecasting: Summary (Part 5)   Read

The rider or the elephant: Who is really in control?   Read

The oldest and strongest emotion – fear   Read

Another Nobel Prize for behavioral economics   Read

The Undoing Project – a friendship that changed our minds   Read

Introversion, extroversion and your finances   Read

We're half way there: How to carry out your resolutions?   Read

The future is better than you think   Read

Careful: You likely suffer from exponential growth bias   Read

 
 
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