Is it easier to make a decision when you have three options or ten options? Whether it’s a restaurant menu, song list, or a full wardrobe, the luxury of wider varieties can often lead to Choice Paralysis. While choosing from more options can often lead to making better decisions, it can also throw our investing momentum into neutral.
On a scale of one to ten, how confident are in you in your ability to plan your financial future? It may be better to ask yourself, “How well do I accurately plan my future?”
Why do you succeed? Why do you fail? How you answer these two questions may reveal your natural inclination towards or rejection of a self-serving bias.
The idea of guaranteed loss at some point over the life of an investment can lead to loss aversion among investors.
How confident are you in being right? If you’re like most individuals, you’re correct only 80% of the time when you believe you’re at least “99% sure” of being right. (Source) Neuroscientist Tali Sharot presented an excellent TED Talk on the subject of optimism bias in Long Beach, California in 2012.
By definition, confirmation bias “occurs when people filter out potentially useful facts and opinions that don’t coincide with their preconceived notions.”
