Age Makes You Happier - And Poorer

If you add this aversion to negative information to the undoubted cognitive decline that affects all of us with the onrushing years it's not hard to see why investment returns start to fall off. Almost certainly most older investors would be better off running a passive portfolio (although, to be fair, that's a statement that could generalize to all investors), but if you can't bring yourself to do that you have to keep exercising the grey matter and confronting the challenges of the real world of investment.

Face the Fear

So, in summary, the age related positivity effect predicts that people of seventy and above will generally avoid any news that contradicts their existing opinions and will make increasingly poor decisions based on outdated or biased information. The investment impact of such decisions is significant.

Of course, if you're a nun who doesn't need to worry about a stock portfolio then a gradual descent into a happy, clappy world of perpetual positivity is fine but otherwise you really need to face up to your fears and address the facts as they are, rather than as you want them to be. The alternative is poverty, or worse.

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Age related positivity effect added to the Big List of Behavioral Biases

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