Behavioral Science You Need To Know To Be A Better Investor
Whenever you make a decision you should always challenge it whether you deciding to move or investing in a stock always ask yourself “is the opposite position better?” Your brain is the best investment and analytical tool you have. Behavioral Sciences and understanding the way our brain works can make us a better investor and well-rounded person.
Nobel Prize winners Daniel Kahneman and Robert Shiller have applied behavioral-economic insights to concepts such as market bubbles and our aversion to losses. Their research shows that during bubbles we become convinced that some greater fool will always pay more for what we’ve bought. It also shows that we irrationally tend to hang on to individual investments longer than we should in order to “get even.” The actual picking of stocks, however, seems to be beneath the dignity of most academics.
When evaluating a long term investment it is always a good idea to let it sit for a few days an d sleep on it. A night of sleep helps the cognitive process and your brain can actually solve problems while you sleep or daydream. Daydreaming is a key component to increasing our creativity.
Read about the secrets of the brain and how they relate to investing.
About Shaun Archer Tatum Shaun works in corporate finance in New York City. He has done financial consulting for several start-ups and has worked at several Fortune 500 companies. He has contributed several finance/investing articles on Seeking Alpha which have been published on Yahoo! Finance.