Also possess of cognitive biases which include of

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also possess of cognitive biases which include of conservatism bias and illusion of control bias. Emotional biases usually arise naturally as a result of an individual's personal emotions at the moment a decision is made (Tim Parker, 2019) and it is completely different from traditional finance as in traditional finance it assume that people are rational and can process all information unbiasedly (University Herald reporter, 2020). Emotional bias may also be based on personal experiences that affect decision-making. If an investor possesses of emotional bias, he or she would make a suboptimal decision as their emotion will take place when making decision. However, emotional biases do not necessarily result in mistakes. In certain situations, an investor's emotional bias may aid them in making a more defensive and appropriate decision. Hence, understanding the emotion bias is crucial as it helps to figure out our investment style. Adapt to a bias means recognising and accepting the bias and making adjustments to compensate for it rather than attempting to moderate it (CFS Institute, 2021). It is more appropriate to adapt emotional biases rather than moderate the emotional bias because emotional bias is rooted in the psychology of everyone and it is difficult to overcome it. It was difficult to change a person’s psychology as they have different living environment and different level of education. Even they live in the same environment and have same level of education, they might also have different emotion because they have their own perspective towards a circumstance. Next, if Mr. J is a wealthy people with emotional bias, there is no significant on moderate or adapt to its bias as he is able to generate huge income and his bias does not affect its income stream. However, Mr. J currently is still working with multinational company as an international corporate lawyer and received annual salary of RM600, 000 and have portfolio worth of RM 3.5 million which still not consider as wealthy people as based on his spending style he will consume all of its saving in few years times. Hence, Mr. J required to adapt to its emotion bias because it is risky for him if he doesn’t know his emotion bias and will cause him shifting away from its goals. For example, due to the overconfidence bias, if Mr. J did not adapt to its bias and continue ignore it, he will underestimate the risk of the stock because he didn’t
looking to its liquidity and its risk return trade off and it will cause Mr. J holding excessive risk that do not suit his risk appetite and hold poorly diversified portfolio. A poor diversified portfolio could experience below market return with excessive risk and cause Mr. J generated return that lower than its expectation. Comparing to the wealthy people, Mr. J will face difficulty if he insists to adapt to its emotion bias and wealthy people could just ignore it because they able to sustain the losses.

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