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Retirees Make Better Financial Decision

Does getting older make you smarter, or does the time slowly corrode your cognitive abilities. There is a study by University of California at Riverside and Columbia University. In which the researchers tested a group of 20 something and people in their 60s and 70s in multiple fields of financing likewise from basic financial literacy to knowledge of debts and risk management and how the participants thought about their financial futures. Despite of getting old the older people perform better than younger ones in every element.

The research concludes that it is all because of change in the intelligence, older people perform better when the decision relies on recognizing previously learned patterns in a stable environment. It is also being learned that most financial decisions rely on knowledge, experience and previously learned patterns.  There are five certain areas where the older ones take control over younger people.

  1. Retired people have a better understanding of finance and debt because they possess greater knowledge about assets, loans and interest rates which leads them to make better financial decisions such as choosing mutual funds with low fees. Moreover they also avoid to have long term borrowing such as taking out payday loans or carrying credit cards balances and they also avoid other incurring financial cost such as high bank fees.
  2. Older people control their emotions better, they are less likely to buy at the top, then panic and sell at the bottom. They are more doubtful about jumping into the latest investments options and trends or buying on a hot tip. Retired personal are also less likely to get stuck into the financial bubble which is about to burst.
  3. Retired don’t panic about the irrelevant information being broadcast they simply avoid it. Likewise news about investment many younger people started freaking out even on irrelevant news because nowadays media put too much attention on the news of the day. Where older people are much aware of these trends and avoid it.
  4. A sense of limitation in old generation where young ones are always overconfident about being right all the time. Older generation have gone through some hard times and have more bitter experiences, same happens with the investments where the experienced investor know the frustration of hoping that a losing investment will somehow make a comeback when all the evidence says it will not. Experienced investors can take small losses and avoid complete disaster.
  5. Experienced people have more patience they know the ups and downs of finances and about investments so they don’t change their decisions on every twist of the financial winds. Older people choose to build slow and in a complete strategic way in order to get a win at the end.

Getting old does not mean you are out of the market they may lack intelligence but they have experience which make them win most of the time.

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