9 Psychological Biases That Hurt Investors

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Know the pitfalls of investing psychology

I should spend time to learn psychological biases, and know the pitfalls of investing psychology. 

1. Home bias
2. Make the easy choice
3. The gambling mentality
4. Short-term thinking
5. Recency bias
6. Overconfidence
7. Confirmation bias
8. Aversion to loss
9. Bandwagon (herd) mentality

Following the financial crisis of 2008-2009, many investors focused on defending themselves another market freefall, rather than on seeking opportunities to profit from the recovery as conditions stabilized.

We are prone to pay undue attention to recent news, either good or bad, and as a result we may underemphasize long-term averages or trends.

Overconfidence

In investing, overconfidence can create problems such as under-diversifying a portfolio or trying to time the stock market instead of sticking to a long-term plan.


He said he got nervous when others get greedy, and got greedy when others get nervous. That's a quaint way of saying he bought low and sold high, exactly what we are told will bring investing success.