MD Physician Services Inc. Chief Investment Officer William Horton Jr., CFA, appeared on BNN’s Business Day to discuss the ideas that drive Behavioural Finance—which uncovers many traps that can negatively affect investors’ decisions.
In essence, Behavioural Finance examines the psychological and emotional elements that distort investors’ rational decision-making process. During the segment, Mr. Horton provided some real life examples of these potential pitfalls such as:
- Loss Aversion (gain and loss not accepted/perceived equally)
- Coherence of Beliefs (investment decision made based on/imitating other’s actions)
- Confirmation Bias (favour investment information that supports one’s belief/stance)
In the interview, when asked how to avoid falling into these traps, Mr. Horton added that professional advisors can help to temper the emotional elements of an investor’s decisions.
He also made the point that physicians themselves build expertise and judgment through a decision-making process that provides immediate feedback in their profession, so they can appreciate how to benefit from applying the same approach in investment management.
To learn more about Behavioural Investment, please follow this link or speak to your MD Financial Advisor.