Behavioral Finance

Free CFP Exam lesson in Psychology of Financial Planning. 13 min read, ~1,888 words.

Overconfidence drives excessive trading, concentrated positions, and underestimation of risk, the most costly investor bias. Loss aversion (Prospect Theory), losses hurt ~2x as much as equivalent gains; produces the disposition effect (sell winners early, hold losers too long). Availability = triggered by vivid/recent recall; representativeness = triggered by pattern-matching to...