Investor Psychology: Chapter 7 - UK Personal Finance Curriculum

Chapter 7 of 10 in the Personal Finance Curriculum.

Chapter 7

Investor Psychology

Understand the biases and emotions that derail smart investors.

What you'll learn

How cognitive biases affect investment decisions
Why panic is the real portfolio killer
The difference between storytelling and number-crunching in investing

The Psychological Toll

The Psychological Toll

Surviving the 20% drop - the psychology of market crashes.

Storytellers and Number Crunchers

Storytellers and Number Crunchers

Which type of investor are you? Two approaches to making decisions.

Write Your Investment Thesis

Write Your Investment Thesis

Write it before the next crash so you have a plan when emotions run high.

What Is Speculation?

What Is Speculation?

Where investing ends and gambling begins.

Why Dividend Investing Feels Safer (But Isn't)

Why Dividend Investing Feels Safer (But Isn't)

The psychological appeal of dividends and why the safety is mostly an illusion.

Knowledge check

Test what you learned

1. The biggest danger to most investors' long-term returns is usually:
Their own behaviour, such as panic-selling in a downturnChoosing a fund with a slightly higher feeHolding too many index funds
2. Writing an investment plan or thesis in advance helps because:
It guarantees higher returnsIt lets you predict the next crashIt gives you a calm, pre-agreed plan to follow when emotions run high
3. Why can dividend investing feel safer than it really is?
Dividends are guaranteed by lawA dividend is not free money: the share price typically drops by the payout, and dividends can be cutDividend shares never fall in value

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