Emotions play a significant role in shaping financial choices from "summary" of Beyond Greed and Fear:Understanding Behavioral Finance and the Psychology of Investing by Hersh Shefrin
Emotions wield immense power when it comes to making financial decisions. These emotions can greatly influence the choices we make, often leading us down paths we may not have taken otherwise. Fear, for instance, can cause individuals to sell their investments hastily during a market downturn, even if doing so may not be in their best interest in the long run. On the other hand, overconfidence can make investors take on excessive risks, potentially leading to significant losses. The impact of emotions on financial decisions is not limited to individual investors. Even professional fund managers, who are expected to make rational choices based on data and analysis, are susceptible to the sway of emotions. For instance, the fear of underperforming against their peers can push fund managers to make risky investments in an attempt to catch up, disregarding the...
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