Part 3/8:
Another critical concept Kahneman examines is the priming effect, where exposure to certain stimuli influences subsequent thoughts and behaviors. In an experiment, students primed with words associated with age walked slower than their peers.
For investors, the priming effect highlights the dangers of emotional responses during market downturns. Media narratives urging immediate selling can activate System 1's primal instincts, often leading to poor financial decisions. To combat this effect, maintaining a consistent investment strategy, such as regularly contributing to investment accounts regardless of market conditions, becomes essential.