What influences our investment decisions?
Our environment influences us more than we might realise. We are constantly gathering and storing information and based on this, we make our choices. 'Availability Bias' is a behavioural concept which describes how our environment can influence our perceptions.
In our experiment we see how something as simple as overhearing a conversation can impact our choices. Think of all the other information we receive daily through the media, friends, colleagues and even strangers.
This is just one example of how immaterial information affects our decision making. Sometimes this information is helpful - other times, it can be out of context and create confusion.
As an example: a person whose home has lost 20% of its market value and whose spouse has endured a long period of unemployment is less like to see or feel an economic recovery even while housing markets show signs of recovery and unemployment improves.1
So, what does this have to do with investing? What it means is that when we're making investment decisions, our personal experiences or the shared experiences of others can influence us, even if they only represent a very small piece of the full picture.
That's why, when it comes to the big financial decisions, it's important to talk to experts who can give you clarity and confidence. That way, you can make the most informed decision and the best possible choice for you.
1 Standard & Poor's. S&P 500 Index: STANDARD & POOR'S®, S&P® and S&P500®.