By late 2021, retail investors were pouring record amounts of money into the market. Tech stocks had been climbing for years. Crypto was making overnight millionaires. The narrative was clear: this is the new normal, and the gains will continue. Then 2022 happened. The Nasdaq fell 33%. Many high-growth tech stocks fell 60-80%. And investors
There’s a moment most new investors know well. You’ve been trading for a few months. You’ve made some money. You’ve read a few books. And suddenly, you feel like you’ve cracked the code that professional fund managers — with their Bloomberg terminals and PhD economists — somehow missed. That feeling? It’s not insight. It’s the
Confirmation bias can lead investors to overly favor information that supports their beliefs while ignoring dissenting opinions. Research shows that confident investors often engage less with negative news. Strategies to counteract this bias include seeking opposing arguments and regularly reassessing investment positions. Cultivating intellectual humility is essential for successful investing.
Despite being a rational investor, you may struggle with a consistently underperforming portfolio due to cognitive biases. Behavioral finance reveals that these biases, stemming from our evolutionary past, lead to poor decision-making. Recognizing and overriding these biases can enhance investment outcomes, prioritizing understanding one’s mind over market knowledge.