Personal Finance--Behavioral Char.
Terms
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- Amiables
- These people are usually clergy and social workers.
- Evaluation Stage
- The life stage when contemplation of the sum total of one's life here on earth. 60 years and older
- 20 weeks
- How long can rationality last in the markets?
- Amiables
- These people never have enough nurturance, have increasing feelings of dependence and helplessness, and believe that having more money will result in their becoming less lovable.
- Loss Aversion
- Every investor abhors the idea of losing money more than he or she prizes the idea of making money.
- Representational Maps
- People develop these through personal representations of experience and assume they are the same as reality.
- Expressives
- These are usually entertainers and salesmen.
- Behavioral Finance
- Originally set forth by Amos Tversky and Daniel Kahneman who developed a theory of biasness called loss aversion.
- Availability
- Estimated future probability is a function of the information that resides in your memory.
- Discovery Stage
- The life stage that includes money and property serving as the medium through which people send and receive information in order to evaluate other people and evaluate themselves. 20-30 years old
- Analytics
- These people cannot bear for things to be out of control, are uncomfortable if there is too much stimulation, and like high structure and low risk.
- Contagious Enthusiasm
- When an investment is hot, the simplest mental short-cut is to follow the crowd.
- Representativeness
- Estimated future probability is a function of similarity to past events.
- Expressives
- These people may invest from time to time but they are likely to raid their accounts impulsively and invest in risky ventures. They tolerate risk well.
- Drivers
- These people will generally save more than Expressives and Amiables and can be expected to tap their retirement accounts for what they consider important or profitable short-term opportunities.
- Effectance Stage
- The life stage where the adult has achieved expertise and is concentrating on his or her career, relationships and other adult activities such as raising their children. 30-45 years old
- Heuristics
- People rely on a limited number of cognitive shortcuts that simplify the complex task of assessing probabilities in an uncertain world.
- Modeling Stage
- The life stage when people become interested in passing their wisdom and their property on to the next generation. 45-60 years old
- Expressives
- These people tend to avoid budgets, do not want to be boxed in, rebel against rules and regulations, tend to spend for the sake of self-image and enjoy risk.
- Drivers
- These people are usually military and entrepreneurs.
- Representation Maps
- The best serve the client, a financial planner must assess the client's __________________ as it relates to the financial planning engagement.
- Small vs. Large Samples
- Investors tend to place significant, but inappropriate faith, in small samples.
- Analytics
- These people have a tendency to save more systematically than the other types and are generally more risk adverse causing them to invest in more conservative investments that are ravaged by inflation.
- Analytics
- These are usually accountants and scientists.
- Drivers
- These people abhor nurturance, buy, compete, and exploit, and they make sure the world knows of their accomplishments.
- Amiable
- These people will generally defer to a partner's savings plan and are generally more risk adverse.