How comparisons can help solve *impossible* decisions for retail investors
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Transcript of How comparisons can help solve *impossible* decisions for retail investors
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April 12, 2023 Copyright © DCisions Limited 2011, All Rights Reserved. Patent No. 7,844,527. 1
How comparisons can help solve “impossible” decisions for
retail investorsJon Hoar, Sept 2012
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April 12, 2023 Copyright © DCisions Limited 2011, All Rights Reserved. Patent No. 7,844,527. 2
What do you do when you can’t make a decision?
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April 12, 2023 Copyright © DCisions Limited 2011, All Rights Reserved. Patent No. 7,844,527. 3
What do you do when you can’t make a decision?
Why are investing decisions so difficult?
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April 12, 2023 Copyright © DCisions Limited 2011, All Rights Reserved. Patent No. 7,844,527. 4
What do you do when you can’t make a decision?
Why are investing decisions so difficult?
How comparisons help decision-making
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April 12, 2023 Copyright © DCisions Limited 2011, All Rights Reserved. Patent No. 7,844,527. 5
What do you do when you can’t make a decision?
Why are investing decisions so difficult?
How comparisons help decisions-making
How comparisons can make investment decisions easier
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April 12, 2023 Copyright © DCisions Limited 2011, All Rights Reserved. Patent No. 7,844,527. 6
We want certainty about, and reward for, our decisions
Certainty
Reward
Immediate Far off
Buyer’s remorse
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April 12, 2023 Copyright © DCisions Limited 2011, All Rights Reserved. Patent No. 7,844,527. 7
We want certainty about, and reward for, our decisions
Certainty
Reward
Immediate Far off
Buyer’s remorse
![Page 8: How comparisons can help solve *impossible* decisions for retail investors](https://reader035.fdocuments.us/reader035/viewer/2022070317/5565df41d8b42ae8258b52d9/html5/thumbnails/8.jpg)
April 12, 2023 Copyright © DCisions Limited 2011, All Rights Reserved. Patent No. 7,844,527. 8
We want certainty about, and reward for, our decisions
Certainty
Immediate Far off
Buyer’s remorse
Reward
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April 12, 2023 Copyright © DCisions Limited 2011, All Rights Reserved. Patent No. 7,844,527. 9
We want certainty about, and reward for, our decisions
Certainty
Immediate Far off
Reward
Buyer’s remorse
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April 12, 2023 Copyright © DCisions Limited 2011, All Rights Reserved. Patent No. 7,844,527. 10
Focus Focus
Work out to lose weight Experience of exercise
Planned work-out time Planned work-out time
More Less
Source: When thinking about goals undermines goal pursuit. Fishbach and Choi, 2012
Long-term goals as motivation?
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April 12, 2023 Copyright © DCisions Limited 2011, All Rights Reserved. Patent No. 7,844,527. 11
Focus Focus
Work out to lose weight Experience of exercise
Planned work-out time Planned work-out time
More Less
Actual work-out time Actual work-out time
34 mins 43 minsSource: When thinking about goals undermines goal pursuit. Fishbach and Choi, 2012
Long-term goals alone aren’t rewarding enough to motivate
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April 12, 2023 Copyright © DCisions Limited 2011, All Rights Reserved. Patent No. 7,844,527. 12
We want certainty about, and reward for, our decisions
Certainty
Reward
Immediate Soon Far off
Buyer’s remorse
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April 12, 2023 Copyright © DCisions Limited 2011, All Rights Reserved. Patent No. 7,844,527. 13
How comparisons help decision-making
How comparisons help decision-making
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April 12, 2023 Copyright © DCisions Limited 2011, All Rights Reserved. Patent No. 7,844,527. 14
Venti black filter coffee
Calories 6
Fat 0.1
Saturated fat 0.0
Venti moccha frappuccino, with whipped cream
Calories 437
Fat 14.6
Saturated fat 8.6
We can use comparisons to: choose our morning drink
Source: Starbucks
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April 12, 2023 Copyright © DCisions Limited 2011, All Rights Reserved. Patent No. 7,844,527. 15
We can use comparisons to: choose how to burn it off
Source: calorieking.com
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April 12, 2023 Copyright © DCisions Limited 2011, All Rights Reserved. Patent No. 7,844,527. 16
We can use comparisons to: find a good walk
Source: walkit.com
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April 12, 2023 Copyright © DCisions Limited 2011, All Rights Reserved. Patent No. 7,844,527. 17
We can use comparisons to: find a good walk
Source: walkit.com
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April 12, 2023 Copyright © DCisions Limited 2011, All Rights Reserved. Patent No. 7,844,527. 18
We can use comparisons to: choose the right dog
Source: findthebest.com
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April 12, 2023 Copyright © DCisions Limited 2011, All Rights Reserved. Patent No. 7,844,527. 19
Can comparisons help investors make confident decisions?
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April 12, 2023 Copyright © DCisions Limited 2011, All Rights Reserved. Patent No. 7,844,527. 20
5 oz
10 oz
5 oz cup 10 oz cup
Source: Attribute Evaluability, Its implications for Joint-Separate Evaluation Reversals and Beyond. Christopher K Hsee 1993
Continuous factors, like returns, are hard to evaluate
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April 12, 2023 Copyright © DCisions Limited 2011, All Rights Reserved. Patent No. 7,844,527. 21
5 oz cup
7 oz of ice cream
10 oz cup
8 oz of ice cream
5 oz
7 oz8 oz
10 oz
Source: Attribute Evaluability, Its implications for Joint-Separate Evaluation Reversals and Beyond. Christopher K Hsee 1993
Continuous factors, like returns, are hard to evaluate
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April 12, 2023 Copyright © DCisions Limited 2011, All Rights Reserved. Patent No. 7,844,527. 22
5 oz cup
7 oz of ice cream
10 oz cup
8 oz of ice cream
5 oz
7 oz8 oz
10 ozSeparate evaluation
XSource: Attribute Evaluability, Its implications for Joint-Separate Evaluation Reversals and Beyond. Christopher K Hsee 1993
Continuous factors, like returns, are hard to evaluate
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April 12, 2023 Copyright © DCisions Limited 2011, All Rights Reserved. Patent No. 7,844,527. 23
5 oz cup
7 oz of ice cream
10 oz cup
8 oz of ice cream
5 oz
7 oz8 oz
10 ozJoint evaluation
Source: Attribute Evaluability, Its implications for Joint-Separate Evaluation Reversals and Beyond. Christopher K Hsee 1993
Continuous factors, like returns, are hard to evaluate
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April 12, 2023 Copyright © DCisions Limited 2011, All Rights Reserved. Patent No. 7,844,527. 24
Can comparisons help investors make confident decisions?
+£558+10.7%
=Continuous factor: Hard to evaluate
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April 12, 2023 Copyright © DCisions Limited 2011, All Rights Reserved. Patent No. 7,844,527. 25
How comparisons can make investment decisions easier
How comparisons can make investment decisions easier
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April 12, 2023 Copyright © DCisions Limited 2011, All Rights Reserved. Patent No. 7,844,527. 26
We can use comparisons to: assess performance
Welcome Jon, let’s see how you’re doing…
Total value
£5,756Your gain
+£558A fair gain
+£533Your return vs.
fair
+£25
Your investment delivered a result better than the fair return benchmark in this time period
Your riskYour returns
12 months
Everyone’s returns
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April 12, 2023 Copyright © DCisions Limited 2011, All Rights Reserved. Patent No. 7,844,527. 27
We can use comparisons to: validate our choices
Welcome Jon, let’s see how you’re doing…
Your gain
£558Highest gain
+£807Lowest gain
+£33Your rating
63%
Your investment outperformed more than 63% of people who invested at this risk level
Everyone’s returns Your riskYour returns
12 months
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April 12, 2023 Copyright © DCisions Limited 2011, All Rights Reserved. Patent No. 7,844,527. 28
People who invested £100 3 years ago
£85Worst return
£129Fair
return
£186Highest return
We can use comparisons to: self-select risk
Source: InvestorBee.com
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April 12, 2023 Copyright © DCisions Limited 2011, All Rights Reserved. Patent No. 7,844,527. 29
People who invested £100 3 years ago
£27Worst return
£139Fair
return
£240Highest return
We can use comparisons to: self-diagnose risk appetite
Source: InvestorBee.com
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April 12, 2023 Copyright © DCisions Limited 2011, All Rights Reserved. Patent No. 7,844,527. 30
Aberdeen Managed Distribution
Henderson Managed Distribution
Brand Well known Well known
Morning Star rating Bronze
Suitability Managed distribution Managed distribution
Fee 1.32% TER 1.44% TER
Net return on £100 after 3 years
£146 £148
We can use comparisons to: optimise our choices
Source: InvestorBee.com
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April 12, 2023 Copyright © DCisions Limited 2011, All Rights Reserved. Patent No. 7,844,527. 31
We can use comparisons to: optimise our choices
Source: InvestorBee.com
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April 12, 2023 Copyright © DCisions Limited 2011, All Rights Reserved. Patent No. 7,844,527. 32
Aberdeen Managed Distribution
Henderson Managed Distribution
Brand Well known Well known
Morning Star rating Bronze
Suitability Medium-low risk Medium risk
Fee 1.32% TER 1.44% TER
Net return on £100 after 3 years
£146 £148
Joint evaluation
+18% +11%
Source: InvestorBee.com
We can use comparisons to: optimise our choices
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April 12, 2023 Copyright © DCisions Limited 2011, All Rights Reserved. Patent No. 7,844,527. 33
13%of members increased
saving rate
50%Increase in
average saving rate
+340%More
responsive campaign
We can use comparisons to: motivate ourselves
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April 12, 2023 Copyright © DCisions Limited 2011, All Rights Reserved. Patent No. 7,844,527. 34
Make investments evaluable: eliminate buyer’s remorse
Certainty
Reward
Immediate Far off
Buyer’s remorse
PerformanceRiskProgress
Continuous factors: hard to evaluate separately
!
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April 12, 2023 Copyright © DCisions Limited 2011, All Rights Reserved. Patent No. 7,844,527. 35
Make investments evaluable: eliminate buyer’s remorse
Certainty
Reward
Immediate Far off
Buyer’s remorse
PerformanceRiskProgress
Comparisons enable easier joint evaluation
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April 12, 2023 Copyright © DCisions Limited 2011, All Rights Reserved. Patent No. 7,844,527. 36
Thank you
Questions?