08 Sep Anchoring
Curious Investor Behaviour – Number 6
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?
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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.