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Introduction
Behavioral finance delves into how cognitive biases and emotional responses influence investment decisions. From panic-selling during dips to greed-fueled buying sprees, emotions can often override rational analysis.
Key Biases
Loss Aversion: Investors fear losses more than they value gains, sometimes selling prematurely.
Confirmation Bias: People favor information that aligns with their existing beliefs, ignoring contradictory evidence.
Herding Effect: Following the crowd without fully assessing investment fundamentals.
Impact on Returns
Research from Dalbar indicates that average retail investors significantly underperform market benchmarks largely due to emotional missteps and market-timing attempts1.
How Surmount Wealth Does It Better
At Surmount Wealth, we integrate behavioral cues into our platform, providing timely prompts and insights that encourage disciplined, data-driven decisions. By automating parts of the process, we help reduce the negative impact of emotional reactions.
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