Smarter Investing using Behavioral Finance with guest, Daniel Folkinshteyn, PhD

Steven Boorstein, PharmD, CFP® discusses with Professor Daniel Falkenstein, PhD, behavioral finance practical examples of how it impacts personal finance decisions. They explore various cognitive biases that affect human behavior, such as overconfidence bias, gambler's fallacy, and status quo bias. They also discuss the importance of early savings and the benefits of index fund investing. The conversation highlights the need for education, coaching, and planning to overcome these biases and make sound financial decisions.

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Takeaways

-Human behavior in personal finance is influenced by cognitive biases, such as overconfidence bias and gambler's fallacy.

-Early savings and index fund investing are key to help creating the foundation for long-term financial success.

-Education, coaching, and planning can help individuals overcome biases and make sound financial decisions. -Setting defaults and automating savings can help overcome status quo bias.

-Avoiding concentrated stock positions and making big mistakes is crucial in financial planning.

 

Chapters 00:00 Intro

01:45 Cognitive Biases

03:27 Overconfidence Bias

04:15 Gambler's Fallacy

06:24 Flea Market Analogy

07:12 Everyday examples of Behavioral Finance(BF) in Personal Finance

08:45 Can investors gain an edge using BF?

11:56 Daniel's take on chart patterns

15:30 Other ways to use BF to improve personal finance decisions

25:25 Can you overcome cognitive biases? 27:00 Having a plan

28:48 Daniel's big mistakes to avoid

31:14 Potential benefits of a financial planner

33:34 Daniel's personal finance book recommendations

35:53 Closing

 

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