May 19, 2016

10 Cognitive Biases That Affect Your Investment & Everyday Decisions

by Chris Mullis, Ph.D.

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.

cb01Bandwagon Effect: Believing or doing something because people around you believe or do it

 

cb02Availability Heuristic: Overestimating the importance of information that is easiest to recall

 

cb03Dunning-Kruger Effect: Unskilled individuals overestimating their
 abilities and experts underestimating theirs

 

cb04Framing Effect: Drawing different conclusions from the
 same information presented differently

 

cb05Confirmation Bias: Seeking and prioritizing information
 that confirms your existing beliefs

 

cb06Curse of Knowledge: Struggling to see a problem from the perspective of someone with less knowledge than you

 

cb07Reactance: The desire to do the opposite of what is requested or
 advised, due to a perceived threat to freedom of choice

 cb08The Sunk Cost Fallacy: Refusing to abandon something unrewarding because you’ve already invested in it

cb09Hindsight Bias: Believing that you could have predicted an event after it has occurred

 

cb10Anchoring Effect: Excessively focusing on the first piece of
 information you receive when making a decision

Source:  Towergate

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