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The implications of this finding are that investors' decisions are heavily influenced by their early adulthood experiences rather than the current economic situation. This could lead to biases in their investment decisions, as they might not fully consider the current economic conditions and the characteristics of the available investment options. It also suggests that personal experiences and perceptions play a significant role in financial decision-making, which could impact the overall effectiveness and success of their investments.
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How should investors manage the inevitabilities of risk? What are the most powerful wealth-building tools that require little technical skill? How do...
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Someone's personal experiences make up only a small portion of what happens, but it makes up most of how that person thinks the world works. In theory, financial decisions should be driven by an investor's goals and the characteristics of investment options available to them. Economists from the National Bureau of Economic Research found that instead, investment decisions are anchored by early adulthood experiences. They found that investors tend to weigh more heavily the experience of the economy when they were young than what the economy is like now. Both luck and risk are often the factors that determine success and failure. Because they are hard to measure, they are often discounted. Some of Bill Gate's success can be attributed to hard work and good decisions. Some of it can also be attributed to his going to a high school with a computer. This was a roughly 1 in 1 million chance in the '60s. To account for risk and luck in decisions, an investor should: 1) Avoid idolization of s...
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