Quality investing

Quality investing can help to counteract investors’ unfavorable behaviors. Learn how you can build your returns on a bedrock of high-quality, resilient stocks.

Various behavioral studies have shown that investors can occasionally act irrationally, meaning their decisions are not always based on rational considerations.

Behavioral finance studies irrational behaviors in the fields of investing and finance. An example of this is the “lottery effect,” which describes the human tendency to systematically overestimate your chances of winning, as is the case when playing the lottery. What are the four behavioral patterns typical of investors, aside from the lottery effect?

Quality investing in a nutshell

As an investment style, quality investing promotes behavior that could counteract these kinds of irrational patterns. However, if investors analyze a company in depth and take factors like profitability, stable profits and capital structure into account, they are more likely to pick high-quality options. This fundamental analysis can help reduce emotions and impulsive behavior when making investment decisions. In the past, quality investing has proven its worth in being able to achieve stable returns, even in volatile or uncertain times.