Behavioral Finance is a fascinating subject that studies why most people make poor financial decisions like buying greedily at market tops and panic-selling at market bottoms. Turns out it is our reptilian brains that makes us irrational beings.
Another recent story suggested that women make better investing decisions than men. More men than women cite greed, overconfidence or impatience for their investing mistakes. Now, I should convince my wife to become more interested in investing. She starts yawning when I mention we need bonds in our portfolios. Sigh!
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3 responses so far ↓
1 Big Cajun Man // May 18, 2005 at 9:49 am
As long as my reptilian brain doesn’t cause me to eat kittens or run for Premior of Ontario, I’ll keep using it.
My wife keeps refusing to make financial decisions too.
c8j
2 Kevin P. // May 18, 2005 at 10:19 am
Shhh… don’t let the cat out of the bag. The herding effect is what allows the smart guys to get rich. If everyone were a Warren Buffet we’d all be making 7%.
I did notice, however, that after your post there’s been a run on heated rocks and crickets.
3 Canadian Capitalist // May 18, 2005 at 8:19 pm
Kevin: That’s a great point about Warren Buffett. The problem with herds is to avoid being trampled by them.
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