“I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.” –Warren Buffett, American investor and billionaire
Think about the last investment you made. Then think about why you made it. Did it make sense?
Our investment choices often don’t come from a reasonable, rational place but rather somewhere more subconscious. Behavioral economics, a field at the intersection of economics and psychology, seeks to understand, explain, and in some cases exploit this rationale. Behavioral economists may make a career of guiding consumers and investors—or even use their understanding of buying and investing behavior to help companies increase their profits.
Disregarding reason and logic when making financial decisions is often as foolhardy as it sounds, but it’s an interesting topic for discussion. Let’s take a closer look at behavioral economics now and review some finance degrees than can reinforce your investment expertise from a professional perspective.
Here are some of the ways psychology is connected to the decisions we make about where we put our money:
A strong stock market can cause investors to see dollar signs and buy and sell accordingly, and overconfidence in a healthy market can lead them to take too many risks. (Contrast this with Becoming Too Self-Assured and Panicking below.)
Some investors may have an inflated sense of their own expertise in choosing lucrative stocks or other types of investments, often due to a single successful experience with investing.
When the economy is in poor shape, some investors may impulsively unload their stocks or other investments.
Out of concern that they might miss an opportunity for an investment to grow in value, an investor may keep an investment of low value for longer than is prudent, ironically missing the opportunity to mitigate their losses.
When an investment is popular, those other people who got in on it must be onto something, right? This kind of mentality was behind the real estate bubble of the early 2000s, among other financial crises. But FOMO—the fear of missing out—can be a powerful motivator.
An investor might use their original stock purchase price as an arbitrary point of reference for when to buy or sell.
An investor may make decisions based on criteria they’re not even consciously aware of, such as finding the company’s logo appealing.
No matter what aspect of investment decision-making interests you, you’ll have the opportunity to thoroughly explore it in one of The University of Texas Permian Basin’s online finance degree programs. Whether you’re looking to advance within your current finance career or are eager to get one started, these AACSB-accredited degrees—taught by highly experienced business professionals and educators—will propel you in the right direction:
Online Master of Business Administration in Finance
An MBA commands tremendous respect in the business world. Our program covers the spectrum of core business disciplines with an emphasis on financial management. You’ll enjoy the flexibility of finishing with 33-42 credits and can graduate in as little as four semesters.
Recommended program courses on this topic include:
Online Master of Science in Finance
Sharply focused on financial management, our 30-credit MS in finance has the distinction of being among a very limited number of STEM-certified programs of its kind in Texas. You can complete this degree in as little as four semesters.
Recommended program courses on this topic include:
Online Bachelor of Business Administration in Finance
An excellent foundation for a finance career and many other careers, this program begins with a diverse range of essential general education courses before transitioning into a finance-oriented curriculum that can prepare you for Certified Financial Planner (CFP) and Chartered Financial Analyst (CFA) designations.
Recommended program courses on this topic include:
Finance professionals with the right credentials and plenty of determination can work in a variety of rewarding roles. Just look at some of the jobs listed below and their corresponding median annual salaries, courtesy of Lightcast:
Set yourself up for financial career success with a finance degree from UT Permian Basin! Apply now.
Sources:
https://www.psychologytoday.com/us/basics/behavioral-economics
https://www.nytimes.com/2018/10/06/opinion/sunday/behavioral-economics.html
https://www.britannica.com/topic/behavioral-economics
https://www.investopedia.com/terms/b/behavioraleconomics.asp
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