| Psychological Bias | Effect on Investment Behavior | Consequence |
| Overconfidence | Trade too much. Take too much risk and fail to diversify | Pay too much in commissions and taxes. Susceptible to big losses |
| Attachment | Become emotionally attached to a security and see it through rose-colored glasses | Susceptible to big losses |
| Endowment | Want to keep the securities received | Not achieving a match between your investment goals and your investments |
| Status Quo | Hold back on changing your portfolio | Failure to adjust asset allocation and begin contributing to retirement plan |
| Seeking Pride | Sell winners too soon | Lower return and higher taxes |
| Avoiding Regret | Hold losers too long | Lower return and higher taxes |
| House Money | Take too much risk after winning | Susceptible to big losses |
| Snake Bit | Take too little risk after losing | Lose chance for higher return in the long term |
| Get Even | Take too much risk trying to get break even | Susceptible to big losses |
| Social Validation | Feel that it must be good if others are investing in the security | Participate in price bubble which ultimately causes you to buy high and sell low |
| Mental Accounting | Fail to diversify | Not receiving the highest return possible for the level of risk taken |
| Cognitive Dissonance | Ignore information that conflicts with prior beliefs and decisions | Reduces your ability to evaluate and monitor your investment choices |
| Representativeness | Think things that seem similar must be alike. So a good company must be a good investment | Purchase overpriced stocks |
| Familiarity | Think companies that you know seem better and safer | Failure to diversify and put too much faith in the company in which you work |
Archives of “colored glasses” tag
rssPortuguese Bank Borrowings From ECB More Than Double In May, Hit All Time Record of €35.8 Billion
Alas, the deteriorating funding environment in Portugal is not a fluke – according to the Bank of Portugal, bank borrowings from the ECB surged in the past month, and doubled from €17.7 billion to €35.8 billion in May. As Steven Major from HSBC said, quoted by the FT: “These yields are approaching that magic number of 5 per cent that is likely to be charged by the European stability fund. If the yields keep going up at this rate, then they will be paying much more than 5 per cent next month, which is arguably unsustainable.” And confirming the non rose-colored glasses reality was another banker who said: “These yields are not sustainable. Portugal will have to access the emergency stability fund if they continue to rise at this rate.” Elsewhere, Greece continue to be bankrupt.
The chart below shows total borrowings from the ECB by Portuguese banks…
