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and want to sell the farm to get in "on the ground floor", also known as FOMO or fear of missing out. ere's a reason the old pump and dump firms made so much money in the 80's. ere is a huge difference between investing and "playing" the market. Have you ever seen the movie Boiler Room? It's like a horror movie to real Advisors everywhere. We still can't believe people fall for some of these scams, but the skill with which they are created and pitched is brilliant, in the sense that the scams play on the psychology and behavior of the public who may or may not be investment savvy. Not stupid, mind you, just naïve. Let's talk about investor behavior and why many investors are their own worst enemy when it comes to investing and portfolio management. We call it "Behavioral Finance". Behavioral Finance is a field of study that seeks to explain the systematic biases and irrational behavior exhibited by investors in financial markets. Traditional finance theory assumes that investors are rational and make decisions based on all available information and data, yet behavioral finance recognizes that this is oen not the case, instead individuals frequently make decisions that are influenced by emotions, cognitive biases, and social factors, which can lead to poor investment choices and negative financial outcomes. One of the most prominent biases affecting individuals is overconfidence. Overconfident investors tend to overestimate their knowledge and abilities, leading them to trade more frequently and believe they can outperform the market. is overtrading behavior oen results in higher transaction costs and taxes, ultimately reducing their returns. More importantly, overconfident investors tend to take on excessive risk, believing that they have superior skill in picking winning investments and they tend to overweight in these investments and do not focus on long term goals or risk management. Occasionally a few wins, so to speak, can amplify their false sense of confidence, causing the investor to go "all in" thinking they can repeat their luck. e negative impact on their portfolios is oen quite dramatic. e overconfident investor also tends to avoid professional guidance and abhor the idea of paying fee, since they know better. Another common behavioral bias is loss aversion, which refers to the tendency to feel the pain of losses more acutely than the pleasure provided by gains. As a result, investors may be more likely to sell winning investments too early, in an attempt to lock in profits, while holding onto losing investments in the hope that they will rebound. is behavior oen results in suboptimal portfolio allocation and missed opportunities for gains, ultimately reducing returns. Loss aversion can also lead to a reluctance to take prudent risks, resulting in missed opportunities. Additionally, things like herd mentality, and, to quote Alan Greenspan, "irrational exuberance" are all factors that come into play. Behavioral finance is a science, and I have been a student of it for over three decades. e impact of behavioral biases on individual investors is further compounded now by the proliferation of information and the rise of social media, the new "cocktail party". e constant stream of news (both real and fake), opinions and investment recommendations (both legitimate and not), can overwhelm investors, leading to decision paralysis, or impulsive trading based on unverified information. Moreover, social media can amplify herd behavior as investors are exposed to the actions and opinions of thousands of people who may or may not be acting on accurate or legitimate information. We oen see people take advice from the herd of strangers but are suspicious of legitimate professionals who specialize in the area, for fear of paying a fee. As a professional Advisor, I oen have to spend as much time psychoanalyzing my clients' inherent biases, as I do analyzing their portfolios. Over the years, I have taught and counseled thousands of clients and retirement plan participants around the country, on the tenets of smart investing, by recognizing that in many cases their own biases and avoidable mistakes are doing them more harm than good. My hope is that they will NOT make the same mistakes so many others do. Seek an appropriate Advisor to work with and follow some very simple rules. VUENJ.COM 93

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