Ambiguity Bias
When people make choices, sometimes they have a good understanding of the probability of something happening whilst other times the situation is ambiguous, whereby the probability of the event is unknown.
In such situations, people are more likely to choose the former situation, preferring a known probability over an unknown probability.
Investing in Fixed Deposits is preferred because the outcome is clear unlike investing in a mutual funds despite the fact that mutual funds beat Fixed Deposit returns hands down.
This is known as Ambiguity Bias.
It is important to know why your investor thinks in a particular way.
Managing investor behavior is the heart of Financial Planning.
Name: Devarajan S
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