Guilty of Shortcut Thinking? It Could Cost You


Everyone suffers from some form of cognitive bias — a kind of shortcut thinking. Some studies suggest that a person can be subject to over 1751 cognitive biases in their day-to-day decision-making. When it comes to financial planning and investments, cognitive biases can result in some costly blind spots or avoidable losses. To check if you are guilty of autopiloting your thinking, start by asking yourself how you go about making important decisions. Do you:
  • Do your own research?
  • Make a pros and cons list?
  • Consult a friend, or an expert?
Our brain tends to have certain cognitive biases, or ‘flaws in our reasoning’, which influence our judgment in terms of the information we focus on, how we remember decisions made in the past, or even the sources we rely upon for our research. A cognitive bias often leads to people deriving conclusions inaccurately, generally due to the misinterpretation of information. How do these findings affect the average person planning financial or investment goals? And importantly, are your decisions influenced by common shortfalls in thinking?

Common behavioural biases that sabotage good decision-making can sound a lot like these:
  • “It won’t happen to me”
  • “I want it now”
  • “I’ll take care of that tomorrow”
  • “I’m afraid to lose it all”
  • “I’ll stick with what I know”
  • “This is Good. That is Bad.”

Comments

Post a Comment

Popular posts from this blog

SG Alliance: Making Your Insurance Nomination

Image
One SGA App SG Alliance is pleased to introduce One SGA App, a new by invitation only membership platform, offering fantastic medical, financial services and Wellness benefits for you, your family and friends. Sign up here: https://jointo.access-my.app//home?tenantCode=SGA&referralCode=A002683 Please do not worry. This is not an online Scam. Download the authentic app & sign up using your email & password. No other personal details, bank account & credit cards are required. For further information, please feel free to give me a call at SG Alliance. Thank you. Assure Your Loved Ones with a Well-made Insurance Nomination Assure your Love Ones with a well-made insurance nomination We buy insurance for the peace of mind that our lives will not be financially upended by any unforeseeable event. Insurance further assures us that our dependants are well looked after, should anything disrupt our ability to continue providing for them financially. A part of everybody’s financial
Read more

AIA Complete Critical Illness Cover‏

Image
Dear friends, How much do you know about Critical Illness? And why is it so important that we need adequate coverage?  Here are some alarming facts and figures: 1.    There are 30 Critical Illnesses, with Cancer and Heart Diseases topping the list 2.    Every day in Singapore, 28 people are diagnosed with cancer* 3.    1 in 4 men and 1 in 5 women will contract one of the Critical Illness before age 65 ^ 4.    1 in 9 women will develop Breast Cancer and 1 in 2 men a risk of Cancer by 2022 ^ 5.    Critical Illness hits young and old alike and an increasing number of younger people succumb to cancer these days 6.    With the advances in medical science, many survive a critical illness - but could face financial difficulties. One inevitably will be without a job when contracted with an illness and will be living off savings during the recuperation period. Upon recovery, getting back to the workforce may be a challenge as well ‘It will not happen to me’ seems the commo
Read more

Realisations of a Financial Adviser

Image
Limited resources, unlimited needs All of us have plenty of financial needs. Insurance for protection, investments for our retirement & kid’s education, paying our mortgages, car loans and so on. But our resources are limited. If you are a male aged 35 and need to provide your family with a monthly income of $3,000 for 20 years in the event of your unfortunate demise, you will need about 600,000 cover. If you intend to retire at age 55, Table 1 shows the comparison for the various types of plans. The truth is, how many can afford paying more than $6,000 or $10,000 per year, just to cover his individual death needs? In the above example, we haven’t even considered his medical, his spouse, and his children insurance needs yet. We can discuss all the merits of whole life with cash values and so on, but if we cannot even fully cover our needs,  what’s the point? TABLE 1: Types of insurance plans *This is a packaged plan by one of the insurers. About temporary and permanent
Read more