Behavior of the Experts

As a society we probably have a problem with hero worship as we place way too much faith in experts and celebrities.This is especially true in the finance industry. There’s been a huge backlash against Wall Street since the financial crisis but far too many people still believe that intelligent sounding individuals or those with a good sales pitch in financial services are all-seeing and all-knowing. People assume professionals should have everything under control because this is what they do for a living, but it just opens you up to a whole host of different biases when you’re dealing with this stuff on a daily basis.Individual investors are often referred to as the “dumb money” or “muppets” because everyone figures that mom and pop is the group making all of the mistakes in the markets. And it’s true that loss aversion and fear and greed drive many investors to chase fad investments or buy high and sell low.

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