Confirmation Bias: Ignoring Contradictory Information Confirmation bias is the tendency to seek information that agrees with what you already believe or hear, while ignoring information that goes against your beliefs.... Read More
Author: Factsheet@Inco
include the dot-com bubble of the late 1990s and the housing bubble of the mid-2000s. When the bubble bursts, many investors face significant losses. Confirmation Bias: Ignoring Contradictory Information... Read More
Impact on Investing: Investors driven by herd mentality often jump into investments because everyone else is doing it. This leads to speculative bubbles, where assets become overinflated in price due... Read More
Herd Mentality: The Imitative Crowd Herd mentality is a phenomenon whereby people tend to follow the crowd without really knowing why they are doing it.... Read More
Impact on Investing An investor may purchase a stock at $100 per share and refuse to sell the stock even if it decreases to $50 per share; they are anchored... Read More
Anchoring: Relying Too Much on Initial Information Anchoring is when an investor focuses on an initial piece of information, for example, the price at which they bought an investment, and allows... Read More
market or select the "perfect" stock, leading to poor decision-making and underperformance. It also leads to an avoidance of diversification, assuming that the chosen stocks will always outperform.... Read More
Impact on Investing: Overconfident investors will take too much risk, make excessive trades, or ignore relevant information. An overconfident investor believes in his or her ability to time the... Read More
Overconfidence Bias: Believing You Know More Than You Do Overestimation of one's ability to predict market movements or to pick a winning investment is an example of overconfidence bias.... Read More
It makes the investor hold onto losing investments for too long, hoping they will recover, instead of cutting losses and moving on to better opportunities. The other consequence It makes... Read More