Could hormones be blamed for a stock market crash? What drives investors to make irrational decisions? Kabir Sehgal, author of the book Coined: The Rich Life of Money and How Its History Has Shaped Us, discusses several variables that lead to poor money management and, ultimately, to market risk. For example, research suggests a link between risky financial decisions and elevated testosterone levels. Beyond body chemistry and endorphins, certain logical biases and fallacious thinking could also endanger a portfolio. Take for example the availability bias, which describes situations in which recent the more likely you can recall something, the more likely you’re going to invest in it. Sehgal explains that investors need to fight against subconscious urges to make irrational decisions.
Kabir Sehgal: Wall Street’s Biggest Problem Could Be High Testosterone
Themes for the next decade: Cannabis, 5G, and EVs
The importance of money in our lives is readily apparent to everyone–rich, poor, and in between. However grudgingly, most of us accept the expression “Money makes the world go round” as a universal truth. We are all aware of the power of money–how it influences our moods, compels us to take risks, and serves as the yardstick of success in societies around the world. Yet because we take the daily reality of money so completely for granted, we seldom question how and why it has come to play such a central role in our lives.