Framing refers to the concept that the way a particular choice is presented can determine how people react to it.. For example, what do you see when you look at the graphic below? Some people see the number 13. Others see the letter B. Your answer may change if you were to see the graphic in different contexts. In this case, information may be framed by other numbers or other letters.
In his book, Thinking Fast and Slow, Daniel Kahneman wrote that "Different ways of presenting the same information often evoke different emotions." Applied to the field of investing, how certain investment results are framed in different contexts can make a tremendous difference in how we feel about them.
Do you find yourself constantly checking your portfolio returns and perhaps losing sleep during inevitable down markets?
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