Saxona learns that Nikki is a mid-level Human resource manager at an IT firm and has built an investment portfolio by accumulating savings, stock options, and restricted stock from her company. Nikki believes that she currently has a sufficient level of wealth to achieve her primary goal of maintaining her current lifestyle until her death.

Saxona also finds out that Nikki likes to keep separate investment accounts for her savings, stock options, and restricted stock. For each of these accounts she wants a different investment strategy. Also, Nikki always follows Peter Lynch's advice of "invest only in what you know". Nikki also believes that she is personally contributing to the performance of her IT firm's stock price. This belief had made Nikki to keep a large proportion of her total portfolio in her firm's stock and options. Saxona tells Nikki that this concentrated holding of her companies stock represents significant risk in achieving her primary goal and advises her to partially hedge the risk of her firm's stock. Nikki refuses to consider the suggestion.

After evaluating the investment style of Nikki, Saxona is concerned that Nikki is exhibiting some of the following biases:

endowment conservatism mental accounting illusion of control

Q) Identify the biases exhibited by Nikki. Justify your answers with reasons

Q) Should Saxona try to moderate Nikki's biases, or adapt her recommendations to better reflect Nikki's biases. Justify your answer with two reasons.