Can a simple checklist save investors money?
A multitude of inbuilt unconscious biases undermine investors’ decision-making
During strong bull markets, positive economic and corporate news can cause investors to forget the lessons of history and to assume the trend will continue indefinitely. Photograph: Michael Nagle/Bloomberg
Invest in a diversified portfolio, rebalance occasionally, ignore short-term market movements and allow your returns to compound over time – investing seems like a simple game but, as Warren Buffett often points out, it’s not an easy one. Could something as simple as a checklist make the game an easier one to play? Six steps – three dos and three don’ts – can help improve investor decision making, says Aberdeen Standard Investments fund manager Joe Wiggins, who has written a behavioural finance toolkit highlighting common investor mistakes. The steps are simple:
- have a long-term investment plan;