5 mistakes and how to avoid them:
- Confirmation bias
- The endowment effect
- Loss aversion
- Outcome bias
Thinking is exhausting work. The brain devours between a fifth and a quarter of the energy used by the entire human body, despite accounting for just 2 to 3 per cent of overall weight. Little wonder it has developed a plethora of short-cuts that enable us to make fast-and-easy decisions that are often very effective.
However, these sort-cuts are so seductively effortless that we often use them to make decisions that would be much better as a product of slow-and-effortful consideration. Listed below are five aspects of human nature that can prove costly for investors.