{"id":1611,"date":"2021-08-24T11:24:55","date_gmt":"2021-08-24T10:24:55","guid":{"rendered":"https:\/\/new.contentdeployment.co.uk\/tomd\/?p=1611"},"modified":"2021-08-26T11:28:35","modified_gmt":"2021-08-26T10:28:35","slug":"taking-emotion-and-colour-away-from-investment-decisions","status":"publish","type":"post","link":"https:\/\/new.contentdeployment.co.uk\/tomd\/2021\/08\/24\/taking-emotion-and-colour-away-from-investment-decisions\/","title":{"rendered":"Taking emotion (and colour!) away from investment decisions"},"content":{"rendered":"
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It is fascinating to consider\nthe psychology of investing. There are many behavioural traps that investors\ncould find themselves falling into during times of market volatility, when knee\njerk reactions can take hold.<\/strong><\/p>\n<\/div>\n\n

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One example being \u2018the\nanchoring trap\u2019<\/em>, which is where investors rely too much on their\nperceptions of an investment, which could be totally incorrect, rather than\nbeing flexible in their thinking and responsive to new data.<\/p>\n<\/div>\n\n

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Separating emotions from market\nreaction and investment selection is a whole different challenge. It can be\nhard to manage our impulses when we see markets fluctuate and we can easily\nunderestimate the risks associated with investments. These are just a couple of\nreasons why investors sometimes make poor decisions based on emotion, which can\nresult in financial loss.<\/p>\n<\/div>\n\n

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Red flag to a bull<\/strong><\/p>\n<\/div>\n\n

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Another added complication has\nbeen highlighted by an interesting new study1 <\/sup>which shows that if\nfinancial information is presented in red, it tends to make people more\npessimistic about the market than presenting the same facts in blue or black.\nIt seems that using the colour red to represent financial data, influences\nindividuals\u2019 risk preferences, expectations of future stock returns and trading\ndecisions. Such effects are not present in those who are colour blind and are\nmuted in China, where red represents prosperity.<\/p>\n<\/div>\n\n

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Assistant Professor of Finance at\nthe University of Kansas, William Bazley, who undertook the research, commented\non the findings, \u201cThe use of colour could lead to investors avoiding the\nplatform or delaying important financial decisions, which could have\ndeleterious long-term consequences. In Western cultures, conditioning of red\ncolour and experiences start in early schooling as students receive feedback\nregarding academic errors in red. Red is associated with alarms and stop signs\nthat convey danger and command enhanced attention.\u201d<\/em><\/p>\n<\/div>\n\n

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Good behaviour<\/strong><\/p>\n<\/div>\n\n

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The good news is that having your\nfinances and portfolio managed for you is one effective way you can avoid these\npotential behavioural pitfalls. You can rely on us to make informed, consistent\ninvestment decisions, not based on emotion but on a robust, objective and\ndisciplined process. We take the time to understand your objectives, apply a\nrigorous process and advise you on the strategies and products most appropriate\nfor you.<\/p>\n<\/div>\n\n

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1<\/sup>The\nUniversity of Kansas, 2021<\/p>\n<\/div>\n\n

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The value\nof investments and income from them may go down. You may not get back the\noriginal amount invested. A pension is a long-term investment. The fund value\nmay fluctuate and can go down. Your eventual income may depend on the size of\nthe fund at retirement, future interest rates and tax legislation.<\/em><\/strong><\/p>\n<\/div>","protected":false},"excerpt":{"rendered":"

It is fascinating to consider the psychology of investing. There are many behavioural traps that investors could find themselves falling into during times of market volatility, when knee jerk reactions can take hold. One example being \u2018the anchoring trap\u2019, which is where investors rely too much on their perceptions of an investment, which could be […]<\/p>\n","protected":false},"author":12,"featured_media":1612,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[32,89,88,90],"tags":[],"hd_content_source":[],"_links":{"self":[{"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/posts\/1611"}],"collection":[{"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/users\/12"}],"replies":[{"embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/comments?post=1611"}],"version-history":[{"count":2,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/posts\/1611\/revisions"}],"predecessor-version":[{"id":1614,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/posts\/1611\/revisions\/1614"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/media\/1612"}],"wp:attachment":[{"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/media?parent=1611"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/categories?post=1611"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/tags?post=1611"},{"taxonomy":"hd_content_source","embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/hd_content_source?post=1611"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}