Behavioral finance is a fascinating field that combines psychology with investing. And one of the insights provided from the research is that some individuals want more from their investments than just returns.
Some people make investments for the same reason they buy Rolex watches and oversized Gucci bags, labels proudly displayed. Just like with their “accessories,” these individuals want their investments to convey status, wealth and sophistication.
I believe it is the need or desire to be a member of an exclusive club that explains why people invest in hedge funds, even though—as we have so often shown—their historical results are horrific.
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