9 Behaveriol Traits To Avoid When Investing

01

Overconfidence

You tend to believe in yourself without considering factors beyond your control.

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RISKS

This may lead you to overestimate your ability to make rational investment decisions. You may think you understand investment markets well and therefore take on more risk than necessary or move investments around too frequently.

 

TIPS

Speak to a Citi advisor who can help provide you with realistic expectations of investment returns and flag potential risks. Most investments are designed to be held for the long term, so don't change them without good reason nor too frequently - moving in and out of investments incur transactional costs, which can impact returns.

 

02

Over-optimism

You tend to overestimate the likelihood of success without focusing on any potential pitfalls.

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RISKS

You may be too focused on the potential positive outcomes and do not realistically consider the possibility of losses.  As a result you may take on more risk than you should.

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TIPS

Ensure you have a full understanding of the investment you are considering and how it can be impacted in differing market environments. Take precautions through diversification. While it does not guarantee against losses, spreading your money across a variety of different investments can limit the impact of market ups and downs.

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03

Impulsivity

You tend to focus on the here-and-now rather than the future and favor immediate rewards rather than future ones.

 

RISKS

You may overvalue immediate rewards to the detriment of long-term goals.

 

TIPS

Try seeing yourself as two people - a short-term spender and a far-sighted planner. Think about what your far-sighted planner would do in order to manage your short-term spending. Consider using the Citigold Total Wealth Advisor to set and stay focused on your long term goals.

 

04

Projection bias

You tend to believe that your current views, feelings and needs will stay the same over time although they are likely to change.

 

RISKS

You inaccurately assess your future needs leaving you at risk of being unable to fulfill your financial requirements.

 

TIPS

Consider a variety of income scenarios for your future and examine what investment steps you need to take today in order to meet these requirements. Be conservative - base investments and contributions today on a worst-case scenario so you have a better chance of meeting your future income needs more comfortably. Citigold's Total Wealth Advisor allows you to stress test your investment portfolio and simulate its performance under adverse market conditions.

 

05

Anxiety Bias

You tend to be easily influenced by the short-term ups and downs of the market and feel compelled to take action.

 

RISKS

This may lead to irrational investment decisions that undermine your long-term financial objectives.

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TIPS

Keep records explaining why you made key financial decisions and refer to them. This can help avoid panic selling, which can result in short-term losses. Limit how often you access short-term information - this encourages a longer-term view of your investments and helps you avoid taking any impulsive or unnecessary action. Consider setting your goals using the Citigold Total Wealth Advisor, which can help you stay focused and grow your wealth more efficiently.

 

06

Herd Bias

You are easily influenced by the thoughts and behavior of those around you and assume that the herd collectively knows something you don't.

 

RISKS

You irrationally follow others - ignoring the information you have and what's right for you as an individual.

 

TIPS

Ask yourself what is driving the herd's behavior, what might they have missed and what other opportunities are available. Seek independent or professional advice. Citi Wealth Insights offers you global investment insights and analysis from Citi analysts and identifies key investment opportunities that may be available.

 

07

Ambiguity Aversion

You prefer choices where the outcomes may be more certain.

 

RISKS

You are likely to pick what you perceive to be safer and more predictable investments that pay you a fixed amount regularly over more volatile investments even if their return potential may be higher.

Understand how different investments perform in different market environments. An uncertain outcome doesn't always mean a negative outcome. Stay focused on your goals and know that all investments will involve a degree of uncertainty.

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TIPS

Understand how different investments perform in different market environments. An uncertain outcome doesn't always mean a negative outcome. Stay focused on your goals and know that all investments will involve a degree of uncertainty.

 

08

Regret aversion

Fear that your decision will turn out to be wrong in hindsight.

 

RISKS

Your anticipation of feeling regret may lead you to not take any action altogether. You may also be tempted to follow the crowd - believing that if things go wrong, you'll have less regret if others have done the same.

 

TIPS

Write down all your options and risks, and match them against your investment objectives. Accept that hindsight comes only after you've made your decision. Remind yourself that you made the best choice with the information you had at the time.

 

09

Loss aversion

You tend to feel losses more sharply than the equivalent gains.

 

RISKS

You may hold onto falling investments for too long to avoid realizing your losses or sell rising investments too soon for fear of losing the gains.

 

TIPS

Look beyond performance. If you are thinking of selling or holding onto an investment, it's not enough to look only at recent returns. Look at market expectations and analyze the merits and pitfalls of the investment versus the alternative options. A financial advisor can help guide you through any uncertainty and manage your expectations.