Behavioural Investing:
Thinking Differently

Ever wonder why some investors are prone to impulsive investment decision making?

Every human being is driven by emotions – more than we would like to admit – and inherent patterns of behaviour should not be overlooked in the advice process.

Today, with the enormous number of people responsible for their own retirement planning, understanding the emotions that drive investment decisions has never been so important.

At its core, Behavioural Investing brings together the influences of sociology, psychology, and finance to better understand the process of investment decision making. It recognises that investors, as all human beings can be, are not always rational, have limits to their self-control, and are often influenced by biases, whether markets are buoyant or in downturn.

By better understanding the practical applications of Behavioural Investing, advisers can help investors make more informed choices, avoid common behavioural pitfalls, and match them to suitable investments, based on their financial personalities and their current financial situation.

By also being more psychologically in tune with investors and having a deeper understanding of their individual behavioural biases, advisers can also build even stronger relationships with investors and better direct them towards achieving their financial goals.

Part 1: Introduction to Behavioural Investing

Watch the video to hear behavioural finance expert Greg Davies from Oxford Risk and Embark Investments’ CEO Barry MacLennan, discuss what Behavioural Investing is, some key behaviours and biases, its practical applications, and the results from our survey.

Lady with sparks from her head

Part 2: Overcoming Behavioural Biases

Recognising and understanding Behavioural Investing biases can be crucial for successful long-term investing. This article reveals how advisers can help their clients overcome some of these key biases and make more informed choices.

Part 3: Investor Archetypes

Investor Archetypes group together investors based on their financial personalities and prominent biases. In this article, we concentrate on four key archetypes that advisers will recognise among their client bases, and outline how advisers can adapt and tailor their guidance to address the biases of each.

Image of people in circles connecting to each other

Four lenses for looking through market volatility

Volatile markets and an uncertain outlook have heightened the risks of investors making emotional investment decisions that are hazardous to building long-term portfolio wealth. This article reveals how advisers can help their clients avoid some of the most common psychological investing traps, such as overtrading, short-termism, herding, and buyer’s remorse.