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7 ways your brain makes you a terrible investor

Sam RoOct 21, 2015, 16:32 IST

Flickr/Julie Falk

It doesn't matter how rational you think you are.

You have a brain, and the chemicals in your brain often force you to make irrational decisions. This affects everything from decisions you make in your love life to trades you make in your investment portfolio.

"Investors are 'normal,' not rational," says Meir Statman, one of the leading thinkers in behavioral finance.

Behavioral finance is the booming field of study aiming to reconcile the discrepancy between rational valuation and irrational market pricing. Top behavioral finance gurus you may have heard of include University of Chicago's Richard Thaler, Nobel Laureates Robert Shiller and Daniel Kahneman, and Credit Suisse's Michael Mauboussin.

With the help of Hersh Shefrin's "Beyond Greed and Fear," we compiled a list of the seven common behavioral biases that drive investor decisions. Read through them, and you'll quickly realize why you make such terrible financial decisions.