Behavioral Finance – How our decision making can hurt our financial security

May 13, 2013

“Fear has a greater grasp on human action than does the impressive weight of historical evidence.” Stocks for the Long Run, Jeremy Siegel, Wharton School of the University of Pennsylvania

One of the deterrents, (if not the only deterrent) to our financial security is behavior. As investors, we seem to fall prey to certain actions. When it comes to our money, that can hurt us more than help us.  Being aware of these behaviors may be critical to your wealth!

We fear loss significantly more than we like gain so sometimes avoid making decisions regarding investments that have the potential for loss.  Yet other times we invest just because everyone else is investing.  We base our decisions on only what we’ve heard or read recently, not considering history or a broad perspective of sources.

Franklin Templeton has developed a simple, online explanation of 5 behaviors that harm us when it comes to investing:

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If a more in depth treatment of these behaviors, go to this link:

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Estate Planning

The recent Federal Budget included an announcement regarding testamentary trusts suggesting some of the tax benefits for creating these trusts are being reviewed.  Regardless whether the tax benefits remain or not, there will still be a place for trusts for spouses in blended marriages and especially for children or young adults.

In the article below, Fiduciary Trust Canada introduces the concept of a Financial Literacy Trusts for our children.  Many of us have sizeable estates, especially when we add in proceeds from our life insurance and or pensions.  An unfortunate tragedy could cause our children to inherit a sizable sum – but will they be able to manage it?

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