Original Article via MoonStone.co.za
According to Hugo one of the easiest ways to incorporate investor psychology into financial planning is to apply goal-based investing, which involves creating specific goals with defined time horizons and selecting investments with the correct asset allocation for each goal. She shares that it works very well for pre-retirement clients who are accumulating wealth, as well as for post-retirement clients who need income from their capital.
She also uses behavioural finance in the wealth-management process to create an awareness of emotional biases that affect investment decisions.
Scenario playing is another excellent way to include behavioural finance in the financial planning process.
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