Welcome back to our alphabetic tour of common behavioral biases that distract otherwise rational investors from making best choices about their wealth. In this edition, we will tackle Fear, Framing, Greed and Herd Mentality.
You know what fear is, but it may be less obvious how it works. When your brain perceives a threat, it releases chemicals such as cortisol and adrenaline that flood the body with fear signals. Even before you are conscious of being afraid, your body experiences a fight-or-flight response. This response can heavily influence your next moves – for better or worse.