10 Cognitive Biases That Affect Your Investment & Everyday Decisions
Research suggests that we make up to 35,000 decisions every single day. Emotions, experiences, and environment can strongly influence our decision making process. Enjoy the cartoons below and learn more about common cognitive biases that impact your everyday life and your investing behavior.
Bandwagon Effect: Believing or doing something because people around you believe or do it
Availability Heuristic: Overestimating the importance of information that is easiest to recall
Dunning-Kruger Effect: Unskilled individuals overestimating their abilities and experts underestimating theirs
Framing Effect: Drawing different conclusions from the same information presented differently
Confirmation Bias: Seeking and prioritizing information that confirms your existing beliefs
Curse of Knowledge: Struggling to see a problem from the perspective of someone with less knowledge than you
Reactance: The desire to do the opposite of what is requested or advised, due to a perceived threat to freedom of choice
The Sunk Cost Fallacy: Refusing to abandon something unrewarding because you’ve already invested in it
Hindsight Bias: Believing that you could have predicted an event after it has occurred
Anchoring Effect: Excessively focusing on the first piece of
information you receive when making a decision
Source: Towergate