Module 2: Behavioral Finance, Communication and Counseling Principles Flashcards
Cognitive Errors
decision making based on well-known concepts that may or may not be correct
Emotional Biases
occur impulsively based on the feelings of an individual when a choice is made
List the Cognitive Errors (13)
- Illusion of Control
- Money Illusion
- Conservatism Bias
- Hindsight Bias
- Confirmation Bias
- Representativeness
- Cognitive Dissonance
- Self-Attribution Bias
- Anchoring and Adjustment
- Outcome Bias
- Framing Bias
- Recency Bias
List Emotional Biases (7)
- Loss Aversion
- Overconfidence
- Self-Control Bias
- Status Quo Bias
- Endowment Bias
- Regret Aversion Bias
- Affinity Bias
Risk Tolerance
the tradeoff that clients are willing to make between potential risks and rewards
Risk perception
the client’s assessment of the magnitude of risks being traded off
Risk Capacity
the degree to which a clients financial resources can cushion risks
Attitudes, Values, and Beliefs
Attitudes reflect a person’s opinion, values, and wants. Beliefs are a type of attitude because they reveal the understanding of some aspect of a person’s life. Attitudes and beliefs for which a person feels strongly are considered values and represent what a person believes to be right.
Perception vs Judgment
Perception - an individuals personal awareness of things, people, events or ideas.
Judgment - making conclusions about what has been perceived.
How do visual learners express themselves?
Through facial expressions and often have interest such as movies ans spectator sports
How to auditory learners express themselves?
through words and often enjoy music and conversation.
How to Kinesthetic learners express themselves?
Through body language and tend to enjoy physical activities.
