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Behavioral Finance

Are you one of those investors who always seem to buy at the top and sell at the bottom? Have you ever wondered why you sometimes seem to make bad investment decisions, even though you consider yourself to be pretty smart in other respects? I've often heard people say, when asked for investment advice: "Just do the opposite of what I do, and you'll do brilliantly!" Why is this is so? Why are we sometimes our own worst enemies when it comes to investment decisions?

When it comes to our investments, it seems that emotion often takes over from reason, and we are driven by innate human characteristics when it comes to certain situations. This is the study of behavioral finance, and in striving towards our goal of helping investors make better investment decisions, we have done a fair amount of research into this subject at Jemstep. 

Our research into the writings of Professor Odean of the Haas School of Business, University of California-Berkeley, and others, was the inspiration for our three-part series on Investing and Human Behavior. Written by my colleague, Katrina Lamb, this is a superb series dealing with behavioral pitfalls that impede smart investment decision-making, and helps you identify common-sense ways to avoid these pitfalls.

Writing in her own inimitable style, Katrina makes this subject interesting, humorous and - most importantly - hugely informative and valuable for anyone who is interested in making better investment decisions.

Here are the links to the three articles in the series: