How Do You Make Financial Decisions: With Emotion or Logic?

Rich As A King

Logical decision making is a crucial part of investing.

But many investors often find themselves driven by emotion rather than logic. For example, the fear of losing, known as “loss aversion,” may tie an investor’s hands and lead him to make poor investment choices. And what about the “disposition effect,” where investors mistakenly hold onto their losers and sell their winners?

Thinking like an economist when managing your money is more likely to make you a winner than if your decisions are based on fear or greed.

 

For more tips on how to think like an economist, click here.

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