Common Investor Biases and How They Can Impact Your Finances

We all have different philosophies when it comes to investing our money. Some of us prefer to manage our investments ourselves, while others may want advice from a professional. Regardless of how you manage your money, we’re all human. Which is to say, we all have biases that can affect the way we invest. Some may have cognitive biases—thinking a certain way or following a rule of thumb because of tradition or a particular school of thought. Others may have emotional biases—making decisions based on how something feels instead of facts. 

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Confirmation bias can happen when an investor makes an assumption or has an existing belief about an investment and looks for information to back up their opinion. Preconceived notions aren’t always accurate, so it’s important to keep an open mind and take a look at all facts when considering new investments. 

One of the best ways to counteract confirmation bias is to play devil’s advocate with yourself or your financial professional. Ask, “What if the opposite were true?” This way, you’re looking at all sides of your investment decisions before making them.