Behavioral Finance: Biases in Investing
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Questions and Answers

Liquidity refers to the ability to convert an investment into cash without impacting its market price and is only necessary for emergency fund requirements.

False

A longer time horizon typically allows for more conservative or risk-averse investment strategies.

False

Financial planning is a systematic approach that helps you manage your money and expenses only.

False

A financial planner is only an advisor for individuals and families.

<p>False</p> Signup and view all the answers

Financial planning helps you identify and prioritize your financial goals, but it does not identify financial stressors in your life.

<p>False</p> Signup and view all the answers

Liquidity is necessary to cover financial uncertainties in the short-term only.

<p>False</p> Signup and view all the answers

A shorter time horizon typically allows for more aggressive or growth-oriented strategies.

<p>False</p> Signup and view all the answers

Financial planning only introduces solutions to increase your cash flow.

<p>False</p> Signup and view all the answers

A financial planner is responsible for making investment decisions on behalf of their clients.

<p>False</p> Signup and view all the answers

What is the potential consequence of a narrow range of experience when making an investment decision?

<p>Missing out on the potential benefits of diversifying their portfolio with other asset classes</p> Signup and view all the answers

How does the resonance bias influence an individual's decision-making process?

<p>By overweighting the importance of information that resonates with their beliefs and desires</p> Signup and view all the answers

What is the characteristic behavior of individuals exhibiting the self-attribution bias?

<p>Taking personal credit for successes while blaming negative outcomes on external factors</p> Signup and view all the answers

How might a narrow range of experience affect an investor's ability to diversify their portfolio?

<p>It may limit their ability to consider other asset classes, resulting in a less diversified portfolio</p> Signup and view all the answers

What is the potential impact of the resonance bias on an investor's risk tolerance?

<p>It may lead to an overly cautious or risk-averse approach to investment decisions</p> Signup and view all the answers

How does the self-attribution bias relate to the concept of accountability?

<p>It involves a lack of accountability for negative outcomes, instead blaming external factors</p> Signup and view all the answers

What is the primary difference between the self-attribution bias and the resonance bias?

<p>The self-attribution bias involves credit/blame attribution, while the resonance bias involves emotional resonance with information</p> Signup and view all the answers

How might an investor's narrow range of experience affect their ability to make informed investment decisions?

<p>It may limit their ability to consider alternative perspectives and evaluate information objectively</p> Signup and view all the answers

What is the potential consequence of the self-attribution bias on an investor's long-term investment strategy?

<p>It may lead to an unrealistic perception of control and a failure to adapt to changing market conditions</p> Signup and view all the answers

How does the resonance bias relate to the concept of emotional intelligence?

<p>It involves an awareness of how emotions influence decision-making, but also a failure to objective evaluate information</p> Signup and view all the answers

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