The irresistible urge that costs retail investors 3% a year // Motley Fool Australia

A natural human need for “emotional comfort” costs retail investors 3% in lost returns each year.

However, United Kingdom behavioural finance firm, Oxford Risk, warned this week that losses in the year of the COVID-19 pandemic would be even higher.

This is because emotions take over even more in times of volatility.

“During a crisis, investors are likely to focus too much on the present and on the detail, feeling compelled to do something even when sitting tight is the best solution,” stated the company.

“They can gravitate towards the familiar – often leading to underinvestment, selling low, or decreased diversification.”

These behaviours are common to many investors, even experienced ones.

Oxford Risk Chief Executive,…