Recognize those cognitive and emotional errors that lose you money..

24. August 2009 by Dan Walkow, CFA, CMT.

 While we know that we made investment mistakes, and vow not to repeat them, most people have only the vaguest sense of what those mistakes were, or, more important, why they made them. Why did we think and feel and behave as we did? Why did we act in a way that today, in hindsight, seems so obviously stupid? Only by understanding the answer to these questions can we begin to improve our financial future.This is where behavioral finance comes in. Most investors are intelligent people, neither irrational nor insane. But behavioral finance tells us we are also normal, with brains that are often full and emotions that are often overflowing. And that means we are normal smart at times, and normal stupid at others. Read more here.

More on how pros take advantage advantage of the “sheeple”. The area of behavioral science is well understood and available to most investors. However, even if you understand “emotional triggers” most individual investors cannot capitalize on them. Each investor is their own worst enemy and it is your emotions vs you or as they say “I have seen enemy and IT IS ME!”

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