Mental accounting can impact investment strategies from "summary" of Beyond Greed and Fear:Understanding Behavioral Finance and the Psychology of Investing by Hersh Shefrin
Mental accounting refers to the tendency for individuals to mentally categorize their money into separate accounts based on various criteria, such as the source of the funds or the intended use. This can impact investment strategies in several ways. One way mental accounting can influence investment decisions is through the creation of arbitrary boundaries between different accounts. For example, an individual may have a separate account for retirement savings and a separate account for discretionary spending. This can lead to suboptimal investment decisions, as the individual may be more likely to take risks with the discretionary account while being overly conservative with the retirement account. Furthermore, ment...Similar Posts
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