Behaving wisely
Associated PressPublished February 4, 2005
If you're like many American workers with a 401(k), you probably tinker with your investments' composition. Vigilance of the market and financial adjustments are smart, right? Um, sure. But many of us do silly things with our investments, and don't even realize it.
Understanding a few basic principles of behavioral finance and how it affects our decisions can help, according to Douglas Mangini, head of Nationwide Financial Services Inc.'s Financial Planners Channel. The company is a division of insurance giant Nationwide Mutual Insurance, based in Columbus, Ohio.
Mangini has a few tips:
- Don't look to "strike while the iron's hot." Statistically, there is no "hot hand" when it comes to investing, just as casinos don't go bankrupt because of gamblers going on a roll.
- Admit mistakes and move on. Don't allow a short-term error to become a long-term problem.
- Don't follow the herd. Staying put or selling out on a company just because everyone else is doing so isn't always wise.