At heart of Nebo is the power that comes from framing – putting a spotlight on the questions that really matter. This in turn helps to deliver a platform that is robust to a surprisingly wide variety of behavioral pitfalls.
“Nebo’s framing of risk as 'not having what you need, when you need it' goes a long way to addressing limited attention/focal bias, and as a consequence, a whole host of resulting biases.”
Limited attention, or an inability to focus on the big picture, while a valuable trait from a short-term Darwinian survival perspective – think “fight or flight” – is at the core of a set of behavioral biases that are counterproductive from a long-term investment standpoint.
A detailed guide to overcoming the most frequently encountered psychological pitfalls of investing. Bias, emotion, and overconfidence are just three of the many behavioral traits that can lead investors to lose money or achieve lower returns. Behavioral finance, which recognizes that there is a psychological element to all investor decision-making, can help you overcome this obstacle.
Behavioral investing seeks to bridge the gap between psychology and investing. All too many investors are unaware of the mental pitfalls that await them. Even once we are aware of our biases, we must recognize that knowledge does not equal behavior. The solution lies in designing and adopting an investment process that is at least partially robust to behavioral decision-making errors.
Sequence of return risk is entirely ignored in much of academic finance. But it is a meaningful risk for the vast majority of investment portfolios and there are useful tools that can mitigate its effects.
People have a strong tendency to favor the present over the future – we are poor emotional time travelers. This has obvious investment implications, especially when saving and investing for retirement. In this paper, we explain this “present bias” and why Nebo is particularly well-suited to helping advisors address it with their clients.
We know from a behavioral perspective that the framing of questions can radically alter the answers given and that it is incredibly hard to remove people’ biases. In this paper, we explore how framing, nudges and re-biasing can influence answers to questions, and how at the philosophical heart of Nebo is a focus on the importance of asking the right questions.
The investor’s chief problem – and even his worst enemy – is likely to be himself.” These sage words – written by the father of value investing Ben Graham - are as true today as they were in 1949. In this paper we examine how evolution has shaped different behavioral biases and how we can turn them to our advantage.