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davidg

Older People Make Risker, Poorer Financial Decisions

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ompared to other age groups, older adults tended to prefer to lock in guaranteed earnings over gambling on a bigger win. But when it came to gambling on a loss (where you can choose between say, a $5 loss or a chance to lose either $0 or $8), older adults took significantly more risks.

Older adults also tended to make more inconsistent decisions “despite clear evidence that they understand the task well”, researchers found.

http://www.businessinsider.com.au/adults-make-riskier-more-inconsistent-decisions-as-they-get-older-study-finds-2013-10

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ompared to other age groups, older adults tended to prefer to lock in guaranteed earnings over gambling on a bigger win. But when it came to gambling on a loss (where you can choose between say, a $5 loss or a chance to lose either $0 or $8), older adults took significantly more risks.

Older adults also tended to make more inconsistent decisions “despite clear evidence that they understand the task well”, researchers found.

http://www.businessinsider.com.au/adults-make-riskier-more-inconsistent-decisions-as-they-get-older-study-finds-2013-10

It's almost as if PIBS and retail bonds were designed to exploit this. Co-op retail bondholders are trying to row back now the die has been cast.

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When you run out of time, and you are still short of money, returns must be made over shorter periods with larger risk. As simple as that.

Edited by evetsm

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ompared to other age groups, older adults tended to prefer to lock in guaranteed earnings over gambling on a bigger win. But when it came to gambling on a loss (where you can choose between say, a $5 loss or a chance to lose either $0 or $8), older adults took significantly more risks.

Older adults also tended to make more inconsistent decisions “despite clear evidence that they understand the task well”, researchers found.

http://www.businessinsider.com.au/adults-make-riskier-more-inconsistent-decisions-as-they-get-older-study-finds-2013-10

The paper does not show that people's evaluation of risk declines as they get older, it shows that older people today have a poorer capacity to assess risk than younger people.

Those older people may not have become worse at such judgements with advancing age, they may simply never have been any good at it. The abstract for the paper doesn't mention controlling for this and it is hard to think of a way that it might.

The older cohort in the trials were aged between sixty and ninety. These are people who grew up in a world where gambling was frowned upon and where financial institutions took their own risks instead of disguising them and pushing them onto their customers. They grew up in a world where you took out one mortgage and paid it off, took out one pension and it paid up, took out insurance confident that claims would be met with compensation rather than an army of lawyers.

I'm all for doing research in psychology it can be very revealing and interesting but it can also miss context in it's attempts to narrow down the parameters it measures. The people in this experiment are not rats or pigeons.

I may be mistaken in this view, I can't see the full paper anywhere for free and a man of my age isn't going to gamble money on getting the full paper and being proved wrong.

Is anyone else amused that the paper appears in a journal called PNAS? Just me then, OK.

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There was a TV programme a few years back (books, who needs them? :) ). Basically they took three generations of the same family to an outdoor pursuits place..

The kids had no fear... throwing themselves down death slides and anything else presented to them. There was little thought given to the dangers, risks, etc

The parents were really nervous about the risks they were being asked to take and those that their kids were taking. I think the mother refused to even watch, let alone participate

The grandparents were like the kids... to hell with the risks, let's enjoy ourselves.

I guess it's the same with money; Kids and Grandparents have less responsibilities, so can afford to take risks, parents are more cautious as they have more responsibilities, more to protect, etc.

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In a groundbreaking study, scientists found 60% of forum participants are unable to read a paragraph and construct an accurate summary of it but will cheerfully whine about the poor quality of media sources while quoting slavishly from the headline.

Try reading it again: "Compared to other age groups, older adults tended to prefer to lock in guaranteed earnings over gambling on a bigger win. But when it came to gambling on a loss (where you can choose between say, a $5 loss or a chance to lose either $0 or $8), older adults took significantly more risks."

The higher risk only applies to anticipated losses and it's a common theme in economics research that humans (of all ages) do not assess potential losses well. That paragraph does not equate to overall "risker, poorer" financial decisions in older people.

Edited by Spork of Damocles

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In a groundbreaking study, scientists found 60% of forum participants are unable to read a paragraph and construct an accurate summary

I read another study that said 72% of forum participants were anally retentive pedants suffering from aspergers but I bet most forums would be less interesting without them.

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I may be mistaken in this view, I can't see the full paper anywhere for free and a man of my age isn't going to gamble money on getting the full paper and being proved wrong.

Contact this person and they will send you a pdf copy of their article for free if you are interested

agnieszka.tymula@sydney.edu.au

Here is the article's Abstract

Edited by LiveinHope

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In a groundbreaking study, scientists found 60% of forum participants are unable to read a paragraph and construct an accurate summary of it but will cheerfully whine about the poor quality of media sources while quoting slavishly from the headline.

Try reading it again: "Compared to other age groups, older adults tended to prefer to lock in guaranteed earnings over gambling on a bigger win. But when it came to gambling on a loss (where you can choose between say, a $5 loss or a chance to lose either $0 or $8), older adults took significantly more risks."

The higher risk only applies to anticipated losses and it's a common theme in economics research that humans (of all ages) do not assess potential losses well. That paragraph does not equate to overall "risker, poorer" financial decisions in older people.

Perhaps not, but the other 319 questions the research asked the participants may well do.

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I read another study that said 72% of forum participants were anally retentive pedants suffering from aspergers but I bet most forums would be less interesting without them.

It's that level of analysis that makes this forum so worthwhile.

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Older people are more trusting of others and financial institutions, their word is their bond...they take things on face value, they do not read the small print...they believe the salesman has read it for them on their behalf...the salesman is on their side. ;)

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