Behavioral Finance Mistakes That Hurt Your Portfolio and What “Good” Returns Look Like
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If you want a smartwatch that delivers more for less, then visit amazfit.com slash smartmoney to get 10% off. That's Amazfit, A-M-A-Z, fit, dot com slash smartmoney. Sometimes your brain can be your own worst enemy when it comes to making progress on your financial goals.
Whether it's keeping your impulse spending in check or sticking to your investment strategy, it's all too easy to get in your own way and do things that aren't in your best interest.
This episode will help you overcome at least one self-imposed roadblock so you can make smarter money moves. Welcome to NerdWallet's Smart Money Podcast, where you send us your money questions and we answer them with the help of our genius nerds. I'm Sean Piles.
And I'm Elizabeth Iola. On this episode, we answer a listener's question about what kind of returns they can expect from their investments.
But first, I want to share an exciting update. Longtime listeners have heard Elizabeth join me on the podcast many times over the past few years, but I'm thrilled to announce that she is officially moving into a new role as my full-time co-host on Smart Money. For folks wondering, we will still have Sarah Rathner join us on the pod occasionally too. But hey, Elizabeth, welcome to the hosting seat.
I'm so excited to be in the co-hosting seat and listeners. My hope is that you aren't throwing virtual tomatoes at me. I plan to give it my best. I love talking about money and it's an honor to help people navigate their financial decisions.
And folks might have noticed that we also have a pretty snazzy new logo for Smart Money. We're always learning and growing here at Smart Money. And sometimes that means getting a fresh co-host, getting a fresh logo and mixing things up.
For anyone out there who's wondering what the heck we're on about, our new logo is neon green in case you're looking for us inside of your podcast app. And while you're there, don't forget to leave a review.
Yes, hopefully a positive one. All right, well, let's get on with the show. To start things off, we are talking about some of the behavioral biases that can get in the way of a good investing strategy. And these are biases that anyone can exhibit regardless of their experience. Joining us to talk about this is Johannes Harrison, a behavioral financial advisor and founder of MoneyScript Wealth Management. Johannes, welcome to Smart Money. Thank you. Good to be here, Sean. Elizabeth, congratulations.
Thank you, Johannes. I appreciate that.
So let's start with a little behavioral finance 101. In essence, behavioral finance is an economic theory that describes how people make decisions about their money based on emotions or psychology rather than acting in a purely rational way. So can you give us a couple of examples of what that looks like?
I'd love to, Sean. Let's start the stage with something in behavioral finance we like to call cognitive dissonance. which is when you have two conflicting beliefs that live in your brain at the same time. For example, have you ever been excited about a stock to go up while at the same time complaining about the prices of the products or services of the company that makes it?
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