When it comes to investing – your financial personality, which is a reflection of your attitude about money based on your behavioral and emotional traits, tends to get in the way of good decision making. When it comes to money, we all know we shouldn’t act emotionally – our brain should take over, but sometimes it doesn’t, sometimes our financial personality gets in the way. The Wall Street Journal recently presented a streaming discussion with several well known experts titled “How to Tame Your Emotions When Investing” focusing on how your financial personality gets in the way of financial success in investing.
In Chapter 1 of Personal Finance, Turning Money into Wealth, we introduce Principle 9: Mind Games, Your Financial Personality, and then in Chapter 11 we look at how your financial personality can get in the way of successful investing. The discussion in The Wall Street Journal Report looks at things like how investors rely on experts, base decisions on opinions rather than facts, trade too much, are overconfident and lose out by paying commissions. The discussion focuses on many different dimensions of “the financial personality” and why many individuals simply are not good investors. Where do you think you fit in? The more you know about behavioral finance the more likely you are to avoid some of the common investing pitfalls.
Class Assignment and Discussion:
1. Listen to the streaming discussion titled “How to Tame Your Emotions When Investing.” One of the items discussed was the fact that investors ignore taxes when making investment decisions. What did Terrance Odean say about this? If you invest, have you ever thought about the tax implications when making an investment decision?
2. Take one item that was discussed in this streaming discussion that you felt was interesting and be prepared to discuss it in class.