Indecision Bias

A not all too famous person once said, “I used to be indecisive.  Now I am not sure.” — me in the not too distant past. Choice is hard.  When faced with more than 2 additional options to choose from, we often get discombobulated…

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Scarcity Bias

No, I am not referring to that 1998 action movie with Tia Carrere.  More to situations where you spend a month researching the best flat screen TV, then invested twice as much money in a penny stock based solely on a hot…

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Anchoring Bias

This is clinging to a fact or figure that should have no bearing on your decision.  Often, we use an initial value or first piece of informationa as a “starting point” in decision making.  Even if the initial value was…

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Decision Heuristics

Or why we adhere so strongly to our beliefs.   One culprit is what the rule of consistency describes: a powerful force that compels us to act in a way that is consistent with our past behavior (this rule is extensively…

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Optimism

People tend to be optimistic about the future and that is not a bad thing in general.  However, this optimism might easily develop into “wishful thinking”. Too much “wishful thinking” will be harmful to your money.  You might be awful at managing your money when…

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Endowment Effect

Endowment Effect is the tendency to fall in love with what we own and makes us resist change.  Or in other words, this is the tendency to consider something you own to be worth more than it would be, if you didn’t…

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Self-Serving Bias

Most of us have a good reputation with ourselves. You associate all of your financial successes with skill, but all your financial failures with bad luck or the “unfair” market.  Rather than admitting and learning from your mistakes, you ignore them, bury…

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Regret Aversion

This is the tendency to avoid taking an action due to the fear that—in hindsight—it will turn out to have been less than optimal.  Like leaving money in a bank account, rather than putting the cash in an investment with…

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