Impact of Emotional Biases on Investment Decisions

In the context of behavioral finance, emotional biases can significantly impact investment decision-making processes. Consider a scenario where a financial planner is working with a couple, John and Mary, who have recently inherited a substantial sum of money. They are experiencing a mix of emotions, including excitement, anxiety, and fear of losing this newfound wealth.

Discuss how emotional biases might affect John and Mary's investment strategy. Identify at least two emotional biases influenced by their situation and explain how these biases could lead to suboptimal investment choices. Additionally, propose strategies the financial planner could implement to help mitigate the effects of these biases and guide John and Mary toward a more rational investment approach.