The #DunningKruger effect now is fairly well known , wherein people with limited knowledge overestimate their competence, whilst the actually knowledgeable question themselves often .
"Ignorance more frequently begets confidence than does knowledge".
A very interesting bias wherein we credit our successes to purely ourselves, but when things go awry we cite luck & external forces .
Rings any bells?
Basically a defence mechanism to protect our self esteem & eventually from personal responsibility.
* #ConfirmationBias *
We all favour ideas & beliefs that affirm to our existing ones' , rarely being open to contradictory opinions .
(Especially in markets !! 😬) Why?
Laziness? Mental block? Ego ?
No wonder, Birds of a feather flock together ... 😉
* #SunkCostBias *
As we know, sunk costs are irrecoverable , regardless of outcomes. (Eg Money expended towards R&D for a molecule which doesn't work out)
But this actually extends in any investment we make - Time,Money, Effort, Relationships ...😏
Be it financial decisions, daily life decisions, our career ...
we tend to go all in because we have invested our time,energy & efforts & we PERSIST with them. The psychological blocks in the way of simply discarding our "misses" & clinging onto them is baffling.
* The #BandwagonEffect*
Commonly known as herd mentality wherein people do something primarily because they see others doing it,despite it not aligning to their beliefs . The best example of it being Markets :)
#SnobEffect works contrary to this .
All of us are guilty of this ! When something happens as per our claims, we tend to blurt out
"I said so ! " 🤷😬
Things are often more obvious & predictable after events transpire.
But intially one can only offer a guess.
Often leads to overconfidence 🙂
* Optimistic/ Pessimistic Bias *
Basically the difference between a person's expectation & the actual outcome.
If reality is better than expected - Pessimistic Bias & vice versa.
Must say for all that positivity I exude, I actually incline toward a Pessimistic Bias! 🤓
Hence it is rightly said, "Never make decisions when sad & promises when happy."
For we tend to become victim to our emotions which makes our thinking irrational .
So are we rationally irrational or irrationally rational ?? 🤔
When faced with a bottleneck we tend to have this bias of leaning toward information which is readily available & retreivable from our memory ,thereby distorting our understanding of real risks . For we assume our recollections to be concise & precise.
As a society we involuntarily tend to do this .
A lady driving well ?
Good looking ,hence must be dumb !
Men & nurturing?
Stereotyping & failing to look at the larger picture before jumping to conclusions based on info available.
* In Group Bias *
Don't we tend to favour our known one's more than a stranger ?
I know I have done this often .
It kind of stems sub consciously .
We think we are being impartial .
It is just our love and kinship onto play here.
If not overdone , is actually healthy.
* The #BarnumEffect *
Wherein generic statements (specifically positive) also seem specific to us because of a combination of wishful thinking & hopefulness.
Often used in horoscopes, marketing & advertising . Heck even in grooming nowadays ! 😀
To sum it up, I guess we all have fallen prey to our biases at some point,for it is easier said than done !
But some #CriticalThinking and #ReflectiveJudgement definitely shall help us in better decision making I guess!
Afterall we all learn from our mistakes!! 🤓🤓🤷🤷
I hope this thread provided some content which might be useful for investing or life in general . .
Thanks for putting up with it ! :)) @position_trader @Vivek_Investor @RichifyMeClub @ms89_meet @safalniveshak