Investment Biases – what are they?

Phil Hendry10/06/2020

It’s YOUR money.
You decide on what your goals are, what to save for and why you want to invest.
This doesn’t always mean behaving rationally when you invest it though, due to investment biases.

Investing only works when we develop good behaviours and, more importantly, avoid the worst.
At Reddington, our team can coach you on how to avoid them.

Here is our top 11 investment biases to AVOID at all costs

Home / Familiarity Bias

Only investing in assets and areas we are familiar with (e.g. property /only UK Shares).

Availability Bias

Have you ever Googled something and taken the first piece of information as fact… is this wise?

Overconfidence / Self attributions

Attributing the success of an investment to skill… when general market conditions may be to thank.

Hindsight Bias

When we look back and attribute a successful decision down to our unique skill, when it was possibly just luck. Or blame our poor decisions on bad luck, rather than lack of skill.

Present Bias

An obsession with the short term or the present, when it’s the long term which generally matters.

Action Bias

As humans we want to remain in control and take action when things aren’t going to plan, while investing, it is one of the worst things we can do.

**A good financial adviser should be able to help you identify your own investment biases**

Loss Aversion

Ever been reluctant to sell something you have lost money on, even if you KNOW that it will never recover to the price you bought it for?

Herding

When everybody KNOWS something is the best investment, and follow each other into it… this could be the worst time to invest in that thing!

Anchoring

Obsessing over an out of date number or value of something, when it is clearly no longer relevant, and having this guide all of your decisions.

Confirmation Bias

Placing too much faith in certain information because it supports our existing views.

Disposition Effect

A willingness to sell your winners and keep your losers….we wouldn’t do this when building a sports team, so why do we did it with investments?

The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.

Let’s begin…

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Investment Biases – what are they?

It’s YOUR money.
You decide on what your goals are, what to save for and why you want to invest.
This doesn’t always mean behaving rationally when you invest it though, due to investment biases.

Investing only works when we develop good behaviours and, more importantly, avoid the worst.
At Reddington, our team can coach you on how to avoid them.

Here is our top 11 investment biases to AVOID at all costs

Home / Familiarity Bias

Availability Bias

Overconfidence / Self attributions

Hindsight Bias

Present Bias

Action Bias

Loss Aversion

Herding

Anchoring

Confirmation Bias

Disposition Effect

Related Articles

Investing – why should you consider it?

Stock Market Investing

Is NOW the right time?

Let’s begin…

Investment Biases – what are they?

It’s YOUR money. You decide on what your goals are, what to save for and why you want to invest. This doesn’t always mean behaving rationally when you invest it though, due to investment biases.

Investing only works when we develop good behaviours and, more importantly, avoid the worst. At Reddington, our team can coach you on how to avoid them.

Here is our top 11 investment biases to AVOID at all costs

Home / Familiarity Bias

Availability Bias

Overconfidence / Self attributions

Hindsight Bias

Present Bias

Action Bias

Loss Aversion

Herding

Anchoring

Confirmation Bias

Disposition Effect

Related Articles

Investing – why should you consider it?

Stock Market Investing

Is NOW the right time?

Let’s begin…

It’s YOUR money.
You decide on what your goals are, what to save for and why you want to invest.
This doesn’t always mean behaving rationally when you invest it though, due to investment biases.

Investing only works when we develop good behaviours and, more importantly, avoid the worst.
At Reddington, our team can coach you on how to avoid them.