Science shows how you can make better investment decisions.
There are serious flaws with the investment decision-making process for most people.
Neuroscientists have used the latest functional magnetic resonance imaging (fMRI) techniques to peek deep into the thinking mind. They have been able to watch it process data, weigh decisions and make critical choices.
What they see helps explain why we create one successive mess after another in our personal and professional lives. They also see how we can learn to make better choices.
To understand this better, consider that when we deal with a very difficult problem the brain uses mental processes called heuristics to solve it. Heuristics are mental shortcuts, developed over time, that focus on specific aspects of complex problems while they ignore others. The reflex action of jerking our hand away from an open flame is a good example. We act immediately upon it without considering the possibility that the action might make us bump into and damage something valuable or knock over something dangerous.
But here’s the rub: it doesn’t happen without effort.
The mounting body of evidence shows that every decision we make is rooted in the circumstances in which we make it and it is governed by our perception of those circumstances. In turn perception is woven by knowledge, data and past experiences.
To make better #investment decisions, we just need to see things from a different perspective and be able to feel what drives us to do the things we do.