Behavioral Finance Biases in Wealth Management for High-Net-Worth Clients

As a wealth manager, you are tasked with constructing an investment portfolio for a high-net-worth client, Mr. Jones, who has expressed a desire for both capital appreciation and preservation of wealth. However, Mr. Jones has a history of emotional investing, often making decisions based on market sentiment rather than objective financial data.

Mr. Jones has recently shown interest in tech stocks, influenced by articles he has read and conversations with peers, despite a significant downturn in this sector. He also tends to overreact to short-term market fluctuations, leading him to frequently alter his investment strategy.

Using principles from behavioral finance, identify at least three cognitive biases that may be affecting Mr. Jones’s investment decisions. Explain how these biases could impact his portfolio's performance and propose actionable strategies you would implement to mitigate their effects while aligning the investment strategy with his goals. Ensure your response draws on both the psychological factors at play and the practical steps you would take as his wealth manager.