5 Behavioral Biases and the Investment Implications

By Dan Crimmins on October 20, 2014 in Behavioral Factors in Investing

We have consistently written about the significant role people have on their own investment performance. I decided in this post to add a video to mix up the delivery, but not the message. The attached video is from our partner, Dimensional Fund Advisors (DFA), and as we are a strong advocate for investing by capturing exposure to the equity markets using asset classes, we are a strong proponent of DFA.

Founder of DFA

Research indicates that humans are not naturally wired for prudent, long-term investing. Scott Bosworth, Vice President and Regional Director at our partner Dimensional Fund Advisors, describes the 5 common forms of behavioral bias and discusses how these biases influence investment decision making.

We describe ourselves as behavioral advisors who help coach our clients to have the discipline and patience needed for long-term investing. We coach them to help influence their own behaviors in order for them to have the discipline to maintain their plan that will achieve their goals.

Scott also explains how knowledge and discipline can help investors control their instincts for a better investment outcome. This is a longer video at 20 minutes than I normally post, but I believe that this will be beneficial for those who view it.

Watch for the quote near the end from our friend – Nick Murray. Behavioral Biases Video

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The foregoing content reflects the opinions of Crimmins Wealth Management and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. All investing involves risk, including the potential for loss of principal. There is no guarantee that any investment plan or strategy will be successful.