10 Personal Biases Impacting Investments

Investing should be a logical thing and rational thing. Quite often, long-term investing success is more closely linked to our behaviour and our decision-making framework than anything else. Over the years, this has played the most impactful role in the outcomes. Unfortunately, often emotions and biases play the spoil-sport and influence our decision-making. While emotions can be managed to a certain extent, the biases are more difficult to handle. We may think and believe that we are acting rationally but in reality, even our rational thoughts and decisions are unknowingly influenced by our biases. Thus, it becomes necessary to identify and understand these biases so that we can mitigate their impact on our investment behaviour and our rational decision-making ability.

In this article, we will explore 10 such common personal biases that can impact our decision-making:

How to mitigate the impact of personal biases on your investments:

Now that we know of the biases we can have in investing, the question is what to do next? Well, there are a number of things that investors can do to mitigate the impact of personal biases on their investments. The first and foremost is to educate ourselves about personal biases. The more we know about personal biases, the better equipped we will be to identify and mitigate their impact on our investment decisions. Being open, flexible and with a bit of introspection, we can overcome a lot of biases.

Next is to create an investment plan and stick to it. An investment plan can help you to avoid making impulsive decisions based on your emotions or biases. As investors in for a long journey towards financial well-being in life, we should focus on learning and keeping an open mind to ideas. We should be smart enough to avoid noise and filter information after judging and validating information from diverse sources. Lastly, it is recommended that we also get professional or expert advice. They can extend a holding hand in managing our emotions and our biases in our investment decisions. By understanding and mitigating the impact of personal biases, investors can make more informed and rational investment decisions.