Everybody has biases. We make judgements about people, places, and of course, the markets. It is almost impossible not to allow the filters which are created through our emotions and our experiences to impact our investment decision making. The trick is to understand them, be able to identify them when they occur and to build in steps to mitigate them when needed.
Renowned psychologist and New York Times best-selling author, Maria Konnikova, recently discussed how behavioural biases impact one’s investments at the 2019 Allan Gray Investment Summit.
In a recent media release Konnikova shares that everyone is presented with a daily barrage of information, from media reports, company statements, market forecasts, expert commentary to banter on social media that ultimately form the basis of our investment decisions. “Making sense of it all can be overwhelming. To facilitate an easier and quicker decision-making process, our brains create cognitive strategies, or shortcuts, called heuristics”, she mentions.
Behavioural scientists have studied heuristics and identified numerous biases that can lead to poor decisions. Click here to read more about these biases.
