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    Behavioral Finance - You Your Biases

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    Julius Mark Carinhay Tolitol
    This document discusses behavioral finance and cognitive biases that affect financial decision making. It begins by stating that financial literacy requires an openness to change poor financial habits. It then lists common money attitudes of Filipinos, such as spending windfalls and putting off savings, that stem from biases. The document covers several cognitive and emotional biases like loss aversion, anchoring, and herd mentality that influence decisions. It concludes that while biases cannot be eliminated, recognizing their impact can help make more objective financial plans and stick to them.

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    Behavioral Finance - You Your Biases

    Uploaded by

    Julius Mark Carinhay Tolitol
    24 views13 pages
    This document discusses behavioral finance and cognitive biases that affect financial decision making. It begins by stating that financial literacy requires an openness to change poor financial habits. It then lists common money attitudes of Filipinos, such as spending windfalls and putting off savings, that stem from biases. The document covers several cognitive and emotional biases like loss aversion, anchoring, and herd mentality that influence decisions. It concludes that while biases cannot be eliminated, recognizing their impact can help make more objective financial plans and stick to them.

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    Behavioral Finance_You Your Biases (2)

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    This document discusses behavioral finance and cognitive biases that affect financial decision making. It begins by stating that financial literacy requires an openness to change poor financial habits. It then lists common money attitudes of Filipinos, such as spending windfalls and putting off savings, that stem from biases. The document covers several cognitive and emotional biases like loss aversion, anchoring, and herd mentality that influence decisions. It concludes that while biases cannot be eliminated, recognizing their impact can help make more objective financial plans and stick to them.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    24 views13 pages

    Behavioral Finance - You Your Biases

    Uploaded by

    Julius Mark Carinhay Tolitol
    This document discusses behavioral finance and cognitive biases that affect financial decision making. It begins by stating that financial literacy requires an openness to change poor financial habits. It then lists common money attitudes of Filipinos, such as spending windfalls and putting off savings, that stem from biases. The document covers several cognitive and emotional biases like loss aversion, anchoring, and herd mentality that influence decisions. It concludes that while biases cannot be eliminated, recognizing their impact can help make more objective financial plans and stick to them.

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    © All Rights Reserved
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    You are on page 1of 13

    Behavioral Finance:

    You and Your Biases


    Joselito B Un
    Certified Public Accountant (CPA)
    Masters in Business Administration (MBA)
    Real Estate Broker (REB)
    Associate Financial Planner (AFP)
    Being financially literate is not a difficult thing to
    accomplish. It just requires an awareness that fosters an
    embracing attitude to change the present financial
    struggles from worse to better. It is hoped that this right
    attitude translates to appropriate behavior towards
    money. It is imperative to cultivate right financial values
    to achieve desired goals and needed savings.
    Money Attitudes
    1. Fiesta Celebrations
    2. Filipino Birthdays
    3. OFW Breadwinner Mentality
    4. Dole-Outs (like Prize Money Game Shows)
    5. “Mañana Habit”
    6. Plight of Senior Citizens
    7. Spending / Shopping Spree
    8. “Juan Tamad” (Comfort Mentality)
    Learning Insight

    Money is not the single definitive way to define


    happiness.
    Workshop 2: Your Call
    • You have strongly believed that the election fever is
    getting your stock a pretty good rally.
    • You have experienced a 5-day winning streak from the
    sustained increases in holding Jollibee stock. Will you
    hold your investment?
    • Your favorite stocks belong to the manufacturing
    sector as you are more familiar with it.
    • You would rather stay home and avoid getting wet in
    the rain. The possibility of having a rain is 30% chance.
    Workshop 2: Your Call
    • Everyone owns a tablet. It must have been the “in thing”
    and the trend. You are planning to have one.
    • Your Ayala Land stock has been down by 30% since you
    purchase it. You intended to hold on thinking that it can still
    recover.
    • You work in a pharmaceutical industry. You believe that you
    got the upper hand in trading this stock over the others.
    • Your parents gave you the house as wedding gift where you
    are presently residing. You are dearly attached to this
    house and at the same time contemplating of migrating to
    the United States.
    Workshop 2: Your Call
    • You are betting on a lotto draw and are excited to pick on
    the numbers by choosing those birth dates of family
    members. The prize money is Php5 Million.
    • You have bought your favorite musical instrument brand
    XYZ and are about to replace it. There are no other brands
    except ZZZ.
    • You were given a musical show pass featuring
    internationally renowned artists. There was a very heavy
    rain and traffic is terrible in the event venue. Contrast this
    with you buying the same musical show ticket at a cost of
    Php1,500.
    Behavioral Finance
    Cognitive Bias
    - Confirmation Bias
    - Gambler’s Fallacy
    - Status Quo Bias
    - Negativity Bias
    - Bandwagon Effect
    Behavioral Finance
    Emotional Bias
    - Loss-Aversion Bias
    - Overconfidence Bias
    - Endowment Bias
    Behavioral Finance

    - Illusion of Control
    - Anchoring
    - Mental Accounting
    Behavioral Finance

    There is no way to eliminate


    bias. It is who we are and those
    biases are not always liabilities.
    Behavioral Finance
    Taking Action:
    1. Use a spreadsheet to calculate risk/reward of every
    investment/trade.
    2. Set your threshold and never deviate from the rule.

    *Set an objective and stick to it. Plan your trade and


    trade your plan.
    Some Rules of Thumb
    1. Younger people fall prey to the need for
    conformity.
    2. We pay too much attention to what people
    might think.
    3. The faster a trend develops, the more it is to be
    thought of as a fad.

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