10 investor behavioural biases to look out for

Engagers are unlikely to be risk-averse but maybe prone to rapid “chopping and changing” of their portfolios. Some might inundate their advisers with questions of all sorts.

Bias and Behavioural Finance

The basic assumption of the Behavioural Finance experts is that we are not as rational as we think we are. Two psychologists (Kahneman and Thayler) have twice won the Nobel Prize for Economics by demonstrating that everybody (yes, advisers and investors alike) are prone to “short-cut”, “quick vs slow” and, therefore, biased decision making.

We are not logical but psycho-logical: prone to lazy thinking which can easily get us into trouble. But being self-aware of the potential of bias can help all of us avoid errors. The list of biases is long, but some are more salient in these unusual times.

Four of the most common of all these biases may however show a decline in these unusual times