What is "behavioral economics"?

Behavioral economics, or behavioral finance, is a relatively new science that tries to help you understand why people make often irrational financial decisions, based upon their own perceptions and biases. For example, if the consumers of a product or stock investment perceive the supply is somehow diminishing, they may be more prone to purchase it now, rather than waiting for a better, more rational time during which to purchase.

Using principles of behavioral economics, how do men and women differ when it comes to investing?

After concluding a study of the investing behavior of men compared with women, experts from the University of California found that single women investors outperformed single men investors by a 2.3% average return. When it comes to investment groups, female-based investment groups outperformed male-based investment groups by 4.6%. The experts assert that the reasons behind this are that men traded 45% more often than women, generally making poor decisions, and holding on to a position too long because of ego and a constant comparison to other investor friends, as opposed to rationally selling laggards and retaining winners.

How do I purchase a company's shares directly from the company, rather than using a broker?

In order to avoid paying transaction fees, many individual investors purchase stocks directly from companies, rather than going through a broker and paying commissions on

Studies have shown that female investors have outperformed their male counterparts because they tend to trade less often and make better, less ego-driven decisions.

Studies have shown that female investors have outperformed their male counterparts because they tend to trade less often and make better, less ego-driven decisions.

the purchase and sale of the stock, which may amount to several percent of the value of the trade. In this case, individual investors may buy shares directly from some companies by identifying the target company's stock transfer agent, discovering if the company offers shares directly to individual investors, and opening an account on the transfer agent's website. The company may require a minimum investment.

 
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