08 Sep Anchoring

Curious Investor Behaviour – Number 6

Anchoring

Faced with uncertainty, investors will grasp at any fixed point of reference when forming opinions. In a classic experiment, behavioural psychologists Kahneman and Tversky asked two groups to guess the proportion of African nations that make up the UN. The first group was asked whether the answer was higher or lower than 10%, while the second group was asked whether it was higher or lower than 65%. The median response of the first group was 25% and the second group 45%!

Can you imagine the perils of anchoring investment decisions on completely irrelevant information?

Disclaimer: Platinum Asset Management Limited ABN 25 063 565 006 AFSL 221935 (Platinum ®) has commissioned this illustration  for your reading enjoyment. There is no intention to provide investment advice, and information presented does not take into account the investment objectives, financial situation and/or particular needs of any person or class of persons. Platinum offers financial products. Further information and a Product Disclosure Statement can be obtained from www.platium.com.au or by phoning 61 2 9255 7500 or 1300 726 700. Before making any investment decision, it is important that you consider (with your financial adviser) your particular investment needs, objectives and financial circumstances. Platinum is a member of the Platinum Group of companies.

About Reuben Zelwer   Reuben Zelwer established Adapt Wealth Management in 2011 to help time poor clients achieve financial freedom. For over 15 years, Reuben has helped professionals, executives, business owner and those approaching retirement make the most of their circumstances by making good financial decisions. Reuben’s professional practice is complemented by substantial voluntary work, which has included setting up financial literacy and savings programs in the local community.