SOCIAL COMPARISON THEORY: Downward and Upward

Posted on November 24, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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According to some studies, as much as 10 percent of our thoughts involve comparisons of some kind. Social comparison theory is the idea that individuals determine their own social and personal worth based on how they stack up against others. The theory was developed in 1954 by psychologist Leon Festinger. Later research has shown that people who regularly compare themselves to others may find motivation to improve, but may also experience feelings of deep dissatisfaction, guilt or remorse, and engage in destructive behaviors like lying or disordered eating.

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Downward Comparison is the act of comparing oneself to others who are worse off to feel better about one’s situation. It’s like looking at someone else’s messy desk to feel better about your clutter.

On the other hand, Upward Comparison is the act of comparing oneself to others who are better off to feel bad about one’s situation. It’s like looking at someone else’s neat desk and feel worse about your own clutter.

Finally, according to Dan Ariely PhD, these coping mechanisms boosts self-esteem or depress us with a sense of relief or dread. While helpful in moderation, relying too much on upward or downward comparisons can help hinder personal growth and/or depress growth or empathy; etc.

So, them sparingly and remember: upward comparisons can inspire you to improve and strive for better; while downward comparisons have the opposite effects.

MORE: https://www.verywellmind.com/what-is-the-social-comparison-process-2795872

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CONTRAST EFFECT: Cognitive Bias

Posted on November 24, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

FOR FINANCIAL ADVISORS

By Dr. David Edward Marcinko MBA MEd CMP™

SPONSOR: http://www.CertifiedMedicalPlanner.org

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Sensation, emotion and cognition work by Contrast Effect [cognitive bias]. 

Now, such perception is not only on an absolute scale, it also functions relative to prior stimuli.  This is why room temperature water feels hot when experienced after being exposed to the cold.  It is also why the cessation of negative emotions “feels” so good. 

Cognitive bias functioning also works on this principle.  So one’s ability to analyze information and draw conclusions is very much related to the context with in which the analysis takes place, and to what information was originally available.  This is why it is so important to manage one’s own expectations as well as those of a financial advisor’s or stock broker’s clients. 

For example, a client is much more likely to be satisfied with a 10% portfolio return if they were expecting 7% than if they were hoping for 15%.

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BID/ASK SPREAD: Basis Points with Formulas

Posted on November 24, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

SPONSOR: http://www.MarcinkoAssociates.com

DEFINITIONS

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Basis Points are used in financial literature to express values that are carried out to two decimal places (hundredths of a percentage point), particularly ratios, such as yields, fees, and returns. Basis points describe values that are typically on the right side of the decimal point–one basis point equals one one-hundredth of a percentage point (0.01%). So 25 basis points equals 0.25%, and 50 basis points equals 0.50%.

Only when basis points equal or exceed 100 does the value move to the left of the decimal point–100 basis points equals 1.00%, 500 basis points equals 5.00%, etc.

CITE: https://www.r2library.com/Resource/Title/0826102549

Bid/Ask Spread (also known as bid/offer spread) is the difference between the National Best Bid and the National Best Offer, which represents the implied cost to trade a security.

As compensation for the risk taken, the market maker (or dealer) earns the bid/offer spread in exchange for facilitating the trade. Wider spreads generally indicate higher costs associated with trading the underlying assets in the ETF, hedging costs, inventory management costs, and general market risk.

CITE: https://www.r2library.com/Resource/Title/0826102549

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PHYSICIAN FINANCIAL FEAR: Money Anxiety & Chrometophobia

Posted on November 24, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

By Dr. David Edward Marcinko MBA MEd

SPONSOR: http://www.MarcinkoAssociates.com

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If you’ve found yourself worrying about the stock market or money lately, you definitely have company. Money anxiety, also called financial anxiety, has become more common than ever after the presidential election of November 2024.

In fact, the American Psychological Association’s 2022 Stress in America Survey, 87 percent of people who responded listed inflation as a source of significant stress. The rise in prices for everything from fuel to food has people from all backgrounds worried, today. The researchers say, in fact, that no other issue has caused this much stress since the survey began in 2007.

When money and financial concerns cause ongoing stress in your life, you could eventually begin to experience some feelings of anxiety as a result. This anxiety can, in turn, have a negative impact on your quality of life.

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Chrometophobia, commonly known as fear of money, is a psychological condition characterized by overwhelming anxiety and avoidance of currency; according to colleague Dan Ariely PhD.

CITE: https://www.r2library.com/Resource/Title/0826102549

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Physician Financial Fear is probably the most common emotion among physicians. The fear of being wrong – as well as the fear of being correct! It can be debilitating, as in the corollary expression on fear: the paralysis of analysis.

According to Paul Karasik, there are four common investor and physician fears, which can be addressed by financial advisors and psychologists in the following manner:

  • Fear of making the wrong decision: ameliorated by being a teacher and educator.
  • Fear of change: ameliorated by providing an agenda, outline and/or plan.
  • Fear of giving up control: ameliorated by asking for permission and agreement.
  • Fear of losing self-esteem: ameliorated by serving the client first and communicating that sentiment in a positive manner.

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