Did you know your brain is playing tricks on you and could put your portfolio at risk? They are called investment biases. It is important to know them in order to protect your portfolio from yourself.
Today, we’ll go through 8 investment biases, as well as the ultimate solution against each.
- What is the confirmation bias and how to avoid it.
- How the consensus bias can lead to events like the GameStop one.
- How the regret or loss aversion bias is directly related to your emotions and can lead to paralysis by analysis.
- How can you recognize the “playing Monday morning quarterback” in the investing world and what is the best solution for it.
- How much adding context is crucial to avoid the anchoring and the recency biases.
- How Mike avoids his own flaws: the overconfidence and self-attribution biases.
- Which bias is investors’ worst enemy and why.
We see the consensus bias even with professionals! As Mike discussed in the episode, we recently saw a great example with Tesla (TSLA). A massive number of retail investors rushed into this stock in 2020. You can see how many different Robinhood accounts hold this new darling:
In this episode, we mentioned Mike’s penny stock failure. This anecdote was part of the episode below. Listen to it now if you missed it: you’ll learn a lot about Mike’s investing journey!
Follow Mike on: