Avoiding biases is THE key to successful investing.
But even Daniel Kahneman said that despite knowing them, you can’t prevent them.
But there is a workaround for investors and all other decision-makers.
Let me explain using the Müller-Lyer Illusion as an example👇🏼
But even Daniel Kahneman said that despite knowing them, you can’t prevent them.
But there is a workaround for investors and all other decision-makers.
Let me explain using the Müller-Lyer Illusion as an example👇🏼
The Müller-Lyer Illusion is pretty straightforward.
Which of the two lines is longer, number one or number two?
Every one of us wants to answer the one on top.
But they are equally long.
It’s a classical optical illusion.
Which of the two lines is longer, number one or number two?
Every one of us wants to answer the one on top.
But they are equally long.
It’s a classical optical illusion.
The interesting thing about optical illusions is that we can’t unsee them.
Even if we know they’re equally long, our brain tells us the first one is longer.
Psychological biases work the same.
Even if we know about them, we can’t prevent them.
Even if we know they’re equally long, our brain tells us the first one is longer.
Psychological biases work the same.
Even if we know about them, we can’t prevent them.
The way to not get tricked by the Müller-Lyer Illusion is always to carry a ruler.
Investors need just that, a ruler.
Something that supports our brain when making decisions.
Investors need just that, a ruler.
Something that supports our brain when making decisions.
For an investor, that ruler is a checklist.
Biases mainly influence “in-the-moment decisions.”
In hindsight, we can spot biases that influenced us (if we critically question our decisions).
Biases mainly influence “in-the-moment decisions.”
In hindsight, we can spot biases that influenced us (if we critically question our decisions).
And as investors, we don’t need to decide on the spot.
We can delay decisions.
Only after our research, we make an investment decision.
While researching, we make hundreds of small decisions.
Many of them will be influenced by biases without realizing it.
We can delay decisions.
Only after our research, we make an investment decision.
While researching, we make hundreds of small decisions.
Many of them will be influenced by biases without realizing it.
But the checklist is our ruler that helps us revisit the whole research process and question our intuitive decisions.
Such checklist should contain all biases that often influence investors when researching stocks.
Such checklist should contain all biases that often influence investors when researching stocks.
I guarantee you, this will drastically change your investment process.
It most certainly changed mine.
Every analysis, I find biases than influenced me and I can revisit that part of the research process.
BEFORE I made the investment.
And that’s the key!
It most certainly changed mine.
Every analysis, I find biases than influenced me and I can revisit that part of the research process.
BEFORE I made the investment.
And that’s the key!
If you are interested in a Checklist containing the most important Biases, there’s a PDF of such Checklist at the end of that article.
You can subscribe to my Substack for free and download it:
open.substack.com
You can subscribe to my Substack for free and download it:
open.substack.com
That’s it for today!
If you enjoyed it, please Retweet and Like this Thread so more get to see it.
If you want to learn more about investing, follow me @MnkeDaniel to see them.
Cheers!
If you enjoyed it, please Retweet and Like this Thread so more get to see it.
If you want to learn more about investing, follow me @MnkeDaniel to see them.
Cheers!
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