Cognitive biases

Forum questions feedback

Which are the two income types with the usage of the concept of
household ledger, that can be relevant in your family based on what you
learnt in the class?

• „pensioners and young people under the age of 30 get a lot of

discounts of transport and cultural things. Now with the inflation and
the global crisis that we are living even more things are free of use, so
it is a great help to decrease expenses.” (Marta)
• „…the state subsidies is one of the most predictable incomes.”
(Dániel)
Forum questions feedback
What are the two savings ideas of expenses with the usage of the concept of
household ledger, that can be relevant in your family based on what you learnt in
the class?

• We should prioritize cutting down on our "wants" (for example: less

entertainment, making food at home instead of going to a restaurant) to relocate
the saved money to the category of investments( stocks, rental property). These
relocated funds will be going to compound overtime and after we built enough
wealth, so we can spend on wants again, but to achieve this we need to closely
monitor our every expense with a household ledger over a 5-10 year period.
(Dávid)
• I do agree with "balancing out our entertainment". Entertainment is essentail to
cope with life. As you said, we should get creative, and find clever and affordable
ways to satisfy our needs for relaxation. (Zsombor)
Assumptions of
behavioral finance

 Investors decide based on preference

and psychological factors.
 Investors perceive trends, although
there may not be a trend at all.
Cognitive process
vs irrationality

 Acquisition and understanding

of knowledge
 Formation of beliefs and
attitudes
 Decision making
 Problem solving
Congnitive biases vs emotional biases

1. Cognitive biases
 misunderstanding data,
 faulty reasoning,
 statistical misunderstanding
 memory errors.

2. Emotional biases
 feelings, intuitions, impulsive
thinking.
 How to overcome
biases?

 Be aware of biases

 Consider the factors that

influence your decisions

 Challenge your biases