St. Cecilia’s College- Cebu, Inc.

LASSO Supervised School

Poblacion Ward II, Minglanilla 6046, Cebu, Philippines
Tel. No. (032)326 3677 / (032) 497 0767 / (032) 268 4746
1st Semester, S.Y. 2023-2024

BEHAVIORAL FINANCE
( ELECTIVE 3 )
Submitted to:

Ms. Kimberlou Najarro

Submitted by:

Abadiez, Genesis Lagaras, Samher

Abarado, Rovic Naveo, Ynna Lyn
Alicaway, Gemrose Maneja, Caren
Bariquit, Kimverly Oros, Jiezel Ann
Baroman, Jean Arnie Paragoso, Jenefer
Cacayan, Leah May Servande, Joan
Coraza, Rachellie Tabay, Wenchille
Culagbang, Marycris Taping, Julie Eunice

BSBA-FM 3A
Client Investment Portfolio Analysis Report

Client Name: Rovic Abarado

Date: April 11, 2024

Introduction: As your financial advisor, I have conducted a thorough analysis of your

investment portfolio over the past few years and identified potential behavioral biases
that you were practicing and may be affecting your decision-making process. Behavioral
biases can lead to suboptimal investment decisions and hinder long-term financial
success. In this report, I will outline the biases affecting your portfolio and propose
strategies to mitigate their impact.

Biases Affecting the Portfolio:

1. Narrative Fallacy Bias: the tendency of investors to be attracted to investments

that have ‘good stories’ while overlooking alternative investments considered to
have rather bad stories.
2. Overconfidence Bias: Overconfidence bias occurs when investors believe they
have superior knowledge or skills compared to others, leading to excessive
trading or taking on higher levels of risk. This bias can result in poor investment
decisions and increased portfolio volatility.
3. Herd mentality/Bandwagon effect: The tendency to copy or follow the ‘crowd’
at the expense of your own independent research and ideas. For instance, in 2021,
there was a buzz around Dogecoin. Most investors flocked to it because of the
‘fear of missing out,’ but they were later trapped when prices tumbled
significantly.
Strategies to Mitigate Biases:

1. Focus on Facts, Not Stories: Look at the actual data and performance of
investments rather than being swayed by their stories.
2. Overconfidence Bias: Mitigating overconfidence bias involves techniques like
seeking feedback from others, maintaining a growth mindset, considering
alternative viewpoints, and objectively assessing past decisions. Setting aside time
for reflection and practicing mindfulness can also help temper overconfidence.
3. Think for Yourself: Don't just follow the crowd. Take time to understand
investments independently and make decisions based on your own research and
goals, rather than getting caught up in trends driven by others' actions.
4. Diversify Your Investments: Spread your money across different types of
investments to reduce the impact of any one story-driven investment performing
poorly.
5. Herd mentality/Bandwagon effect: To mitigate herd mentality, it's crucial to
cultivate independent thinking and decision-making skills. Setting clear goals and
values can help you stay grounded and make decisions aligned with your own
beliefs rather than following the crowd blindly.
6. Promote Critical Thinking: Never take something at face glace and always
examine biases. Look for evidence that supports or contradicts the allegation
7. Seek Diverse Views: Through analyzing and clarifying the events from different
viewpoints, you can possibly arrive at a more sophisticated standpoint.
8. Acknowledge Complexity: Real-life events often involve a variety of interrelated
factors and complicated relationships that are too complex to be properly
explained in a simple manner.

Conclusion: In conclusion, it is essential to recognize and address behavioral

biases that are impacting your investment decisions. By implementing strategies such as
diversification, regular portfolio reviews, and setting clear investment goals, you can
mitigate the effects of biases and improve the overall performance of your portfolio.
Behavioral biases in investment decision-making can significantly impact financial
outcomes. Rovic Abarado's portfolio has three key biases: narrative fallacy bias,
overconfidence bias, and herd mentality/bandwagon effect. Addressing these can improve
financial outcomes by conducting thorough research, acknowledging knowledge limits,
and encouraging independent thinking. By recognizing and addressing these biases,
investors can make more rational, objective decisions, leading to better risk-adjusted
returns, reduced portfolio volatility, and improved long-term financial success.

Sincerely,

Joan Servande

Financial Advisor