Behavioral Finance

Behavioral Finance

Nudge by Richard Thaler

What is Nudge?

Nudge: Improving Decisions About Health, Wealth, and Happiness, is a popular book written by Nobel Prize winner Richard Thaler and Harvard Law School professor Cass Sunstein about the choices we all make, and how those choices may be deeply affected by bias. The authors argue that many of our decisions – about investing, education, our jobs, our families, and about society as a whole – are often poorly chosen. Examining how we think and how we behave, the book offers a way to “nudge” ourselves and others towards better decision making. The term has become popular in financial jargon.

Nudge vs. Sludge

An example of “nudge” is when your advisor urges you towards a sound decision that is clearly in your best interest. However, when a financial firm or any other type of company pushes you to sign up for something you don’t need or want, that is often called “sludge.” Nudge is a way to urge you towards good, while sludge urges you towards something that is not necessarily going to benefit you.

Behavioral Financial Advisor

Behaving “well” as an investor is important; some of it comes down to being able to understand your own biases and subjectivity. The less emotional, the better the investor. Having a trusted financial advisor at One Day In July will help you stay on an objective, well-reasoned course when considering your investment plan.

Long Term Goal: Grow Your Wealth

The human mind tends to overweight near-term historical experiences and underweight the long term. As humans are emotional and easily distracted, we also may make decisions that are not in our own best interests. It can be easy to lose sight of our long-term goals (investment or otherwise). At One Day In July, your financial advisor will help you stay on track and keep your eye on our shared long-term goal of growing your wealth.

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