Behavioral Finance and Biases in Investing

Every day, we are faced with numerous decisions. Should I cross the road now or wait for the oncoming truck to pass? Do I want fries or a salad for lunch? What amount should I tip the cab driver? Often, we make these decisions effortlessly, relying on heuristics, which are mental shortcuts that help us navigate our lives. These shortcuts are crucial as they prevent us from being overwhelmed by the countless choices we encounter. However, there are situations where these shortcuts can lead to predictable errors. By being aware of these errors, we can avoid falling into their traps. For instance, did you know that we have a natural inclination to sell investments that are performing well but hold onto those that are performing poorly? It's also common for us to select suboptimal insurance payment plans and purchase insurance that is unnecessary. Furthermore, many of us fail to enrol in our employer's corporate retirement plans, even when they offer matching contributions. Behavioral finance focuses on studying these and various other financial decision-making errors that can be avoided if we understand the biases behind them. In this workshop, we explore these predictable errors and identify the areas where we are most susceptible to them. The aim is to provide participants with guidance towards making better financial choices. By learning how to enhance our spending, saving, and investing decisions, we can improve our financial well-being for the future.