The worst thing in this world is self-inflicted injuries. Here are few important perspectives discussed how not to do stupid stuff in the financial segment. Take note that the greatest challenge is to think clearly about money. Smart money decisions offers us good cushion for our retirement and avoid falling prey to below mentioned mistakes:
Loss aversion
Increase of retirement portfolio by about $35,000 makes you happy, but if the same figure decreases it is a lot more emotionally as it is human nature to protect wheat we have. A loss compels in taking unwise action.
Confirmation bias
Humans always want to know that he or she is right. What you should do if your investment portfolio decreases with the overall market and you thereafter feel uncomfortable. Informed decision-making is comprehensive and seek contrary evidence. This will minimize confirmation bias.
Herd Mentality
We always try to be part of a group rather to be alone to seek safety. When we make financial decisions, it is obvious we join the herd. To minimize this habit it is suggested to be a contrarian after examining the situation comprehensively with objective data as well as your common sense. If still you find difficulty in standing out, seek such person who is contrary and consider his or her reasoning.
