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What might help Michel Pireu     | Business Day Tuesday, February 5, 2019
From Hoe Wiggins at Behavioural Investment come five ideas, influenced by behavioural science, which could lead to better long-term investment decisions:

Check your portfolio less frequently. Quite simply – the more frequently we check our portfolios, the more myopic and risk averse we are likely to become in our decision making.

Don’t make emotional decisions. How we ‘feel’ at any given point in time can have a material influence on the manner in which we perceive risks and assess opportunities. If there is any chance that emotion is overwhelming your thinking – postpone the decision. If the idea was a good one, it is still likely to be tomorrow, or next week.

Make doing nothing the default. The more we are bombarded with news, information and opinion the greater the temptation to be busy fools and justify our role as investors by taking action, any action. For a variety of reasons doing nothing often appears to be hardest decision to come to, but it is often the correct one.

Choose sensible reference points. “Whilst your balanced portfolio lost 7% during the period, the NASDAQ Biotechnology index fell by 23%...” Loss aversion is a well-understood concept, but the important role of reference points is understated. We experience gains and losses relative to a particular level, value or benchmark, and what that reference point is can materially impact both how we think about investment performance and the decisions we make.

Write a pre-mortem. Prior to embarking on a course of action, you imagine a future state where this action has ended in failure, and then list the reasons why it has gone wrong. The technique forces us to engage with the prospect of being wrong and serves to puncture overconfidence. It also provides the opportunity to retrospectively review what was considered to be the primary risks at the time of the investment.
 
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