Decision-making

Does how you frame choices change your decisions?

Imagine you're deciding whether to invest in stocks or bonds. The way the options are presented can sway your choice.

The framing effect means that people's choices are influenced by whether outcomes are presented as gains or losses, not just the outcomes themselves.

Example

If stocks are framed as a potential 10% gain versus bonds as a 10% loss, even though the outcomes are numerically the same, you might prefer stocks.

Remember this

You might choose differently just because of how the choices are framed.

Text adapted from Wikipedia, licensed under CC BY-SA 4.0.

Related concepts

Status quo bias

Why do we stick to the default option even when it's not the best choice?

Mental accounting

Mental accounting influences spending and saving decisions

Mental model

Why do you save money for a vacation instead of investing it?

Recency bias

Recency bias overvalues recent events in decision-making

List of cognitive biases

Why do you choose a smaller reward now over a bigger one later?

Corporate governance

Why do some managers take more risks than others?

Educational content, not financial advice.

Swipe through more Finance concepts