An awareness of the relationship between the two gives you the tools to make better investment choices, writes Charles MacKinnon, partner and portfolio manager at Thurleigh Investment Managers.
Readers of this magazine will have seen an increased number of articles that mention ‘Behavioural Finance’, and wondered what exactly it is referring to. As with many investment themes, it covers a multitude of facets of the investment process. The core concept is that while we might think that we are rational in our investment choices, in fact we are significantly driven by behavioural factors, which can be loosely divided into two main types; heuristic factors and framing factors. Let us imagine we are trying to choose a bond fund for a client, and try to split out the rational and ...
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