The Flaws of Our Financial Memory

Klement, Joachim
August 2010
Journal of Financial Planning;Aug2010, Vol. 23 Issue 8, p54
Academic Journal
The article discusses the functions of the memory wherein a neuroscientific research was conducted to study an area of the memory where memory flaws can be found in relation to remembering financial events and decisions. The findings of the research show that faulty memory can cause sub-optimal financial decisions and impair the ability to learn from previous experiences. D.L. Schacter has categorized seven main memory flaws and they are transcience, absent-minded, blocking, misattribution, suggestibility, biases and persistence. According to the author, two kinds of techniques can be used to protect investors and advisers from memory flaws and these are investment policy statements and financial diaries.


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