Week 6: Investment and human behaviour

Introduction

Welcome to the final week of Managing my investments. Watch the video to hear Martin Upton introduce this week’s topics.

Download this video clip.Video player: ou_futurelearn_mmi_vid_1142.mp4

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Transcript

MARTIN UPTON

Hello again everyone and welcome to the last week of Managing My Investments. I’m Martin Upton, Director of the True Potential Centre here at The Open University. This week we examine the impact that behaviour – be it individual behaviour or group behaviour – can have on investment decision-making. The past weeks may have given the impression at times that the practice of investment management is a practical branch of mathematics.

Far from it. Decisions are commonly influenced or completely swayed by behavioural biases that run counter to investment best practice. We’ll look at those biases that affect behaviour by individuals and at how other biases can enter the investment decision-making process when it is conducted by groups of people. We’ll also hear from some experts on the subject.

The week and the course, concludes with a longer test that examines your knowledge across not only this week’s content but all the earlier weeks too.

So enjoy this last week of Managing My Investments and best wishes for the test.

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In this week, you’ll focus on how aspects of human behaviour can affect out financial decision-making including decisions about investing. These behavioural traits can threaten to undermine the rational and systematic approach to investment decision-making set out in the four stage investment planning model that we have been using during this course.

While much of the content of this week relates to professional investors, the behavioural biases explored apply equally outside the business world and can affect the way we go about investing – with potentially adverse consequences. The message is clear – understand your bad habits when it comes to finances and avoid them when managing your investments!

You then have one last look at the shares you have been following and the gilt yield curve. You can, of course, continue to follow these prices and yields after the course has finished armed with the knowledge you have gained from Managing my investments.

The course finishes with an extended quiz covering not only this week but the earlier weeks of the course.