Is your brain losing you money? 8 questions to understand if you have investment biases, how to avoid them

economictimes.indiatimes.com:

All of us invariably have personality quirks, preferences and perceptions about ourselves. Most of these prejudices are subconsious and often cloud our judgement, whether it is about the career we want, the person we want to marry, or how we should spend and invest our money. These behavioural biases often come to the fore when we take financial decisions.

Instead of being rational about our money, we are swayed by emotions and impulses, which prevent us from arriving at objective decisions. Understanding our biases can help us overcome these issues and turn us into better investors and savers. It can help lower the risks and improve our financial well-being in the long run.

So, here are eight questions that will help you understand if you have any biases and what you can do to avoid them.Answer the following to find out if you have a bias Understanding one’s financial biases can be challenging as these often operate on a subconscious level. Here are three questions that can help you identify these.Is your decision backed by data or based on what you have seen and heard? Check if the way you spend, save or invest helps achieve individual goals or because it feels comfortable and familiar. For instance, many people use money the same way as their parents.Is your portfolio diversified or not? List all your assets and their percentage in your portfolio.

If the portfolio is skewed heavily towards an asset, there may be a bias. One example is of people who invest heavily in fixed deposits because they are risk-averse, even though these will not beat infl ation. Do you simply save money or do you have a strategic plan? Savings are useful only if they help you achieve some goals. So, you need to formulate a plan that can help