Another 14 ways our mind plays tricks on us as investors...

Another 14 ways our mind plays tricks on us as investors...

We like to think we’re rational human beings.

However last week I’ve shared with you the concept that we are in fact prone to a group of cognitive biases that cause us to think and act irrationally, and this affects many of our investment decisions.   

Even thinking we’re rational despite evidence of irrationality in others is known as blind spot bias.

I shared with you the concept of Confirmation Bias, which is the natural human tendency to seek information that confirms our pre-conceived conclusions.

In my view confirmation bias is a major reason for investment mistakes, so I recommended you always attempt to challenge the status quo and seek information that causes you to question your investment strategies.

I also showed how the Bandwagon Effect describes gaining comfort in something because many other people do, or believe, the same.

This is also called “herd mentality”, but we know “the herd” is usually wrong – most property investors never build a substantial portfolio.

So it pays to consider the concept of counter cyclical investing.

I also discussed the concept of being biased towards overwhelming negativity or positivity – which often becomes apparent when couples are investing, and they realise they are in opposite camps.

Today in the second part of this 2 part series, I’ll examine some further ways the way our brains sneakily convince us to make decisions that aren’t always in our best interests.

To continue reading, please   click here . 

Source: propertyupdate.com.au