Steps You Can Take to Reduce the Risk of Behavioral Error
Following a systematic, rules-based approach and automating your process to the extent possible is the easiest way to manage your emotions and use the tendency to adhere to the status quo to your advantage.
Psychologist and behavioral finance expert Daniel Crosby, Ph.D., and I recently spoke about the types of behavioral risk investors face and what they can do to avoid them.
—Charles Rotblut, CFA
In your book, “The Behavioral Investor” (Harriman House, 2018), you grouped the various biases and mental shortcuts influencing investors’ decisions into four types of behavioral risk. Could you provide a brief overview of what those types of risk are?