How investors can overcome their worst enemy

Behavioural economics panelists offer solutions.

Rudy Luukko 24 October, 2017 | 5:00PM

Striving to be a smart investor in the 21st century isn't easy. All of us face a bewildering array of product choices and information sources in an ever-expanding investment universe. The financial markets are volatile and unpredictable. There's also the question of deciding which asset management and financial advisory services are best for you, and how much you should be willing to pay.

On top of these external factors, your worst enemy as an investor may very well be yourself. Your biases and beliefs. Your fears or, alternatively, your bravado. Behavioural economics, the subject of this month's series of Morningstar Executive Forums, is the study of these personal tendencies and how to counter the negative impacts they have on the investor experience.

One tendency that can hurt investors is overconfidence, says Jason Stewart, executive advisor, financial services, with the consulting firm BEworks. "Most people believe that bad things are not going to happen to them. They won't experience either a family breakup, illness, some element of variability with respect to their employment income and the view that they can wait to engage in not only having sufficient savings but also financial planning, especially for retirement."

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About Author

Rudy Luukko

Rudy Luukko  Rudy Luukko is a freelance writer who contributes to Morningstar.ca on topics involving fund industry trends and regulatory issues. He retired in May 2018 from his position as editor, investment and personal finance, at Morningstar Canada, where he had worked since 2004. He has also worked as an editor and writer for various general, specialty and institutional media, and he has co-authored courses for the Canadian Securities Institute. Follow Rudy on Twitter: @RudyLuukko.

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