
- Over- and under-confidence are two factors that can lead to portfolio underperformance.
- Mental accounting is when you focus on the detriment or attributes of a single holding, rather than viewing it within the context of your total, diversified portfolio.
- Lack of self-control can lead us to spend money on vacations today that we could take when we’re in retirement – with no specific date to return to work.
- Anchoring bias is when an investor places too much value on the first piece of information that led him to invest in a holding and is unable to accept or process new information as it relates to that holding.
- Trust and control – when working with a financial advisor, you must exhibit both. Trust his or her judgement but do not relinquish so much control that you place your financial future at risk.