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Understand and overcome investor biases

If you know what biases you are prone to, you can control for them and become a better investor
Understand and overcome investor biases

The father of value investing Ben Graham famously said that in the short-run, the stock market is a voting machine. Yet, in the long-run, it is a weighing machine. 

It follows that as long-term investors, we should be able to make better decisions by stripping out our emotions, having a plan and sticking to it. Greed and fear are the two emotions that result in so many people buying when markets are high and selling when they are low.

 

 

Behavioural economists have identified hundreds of psychological biases that

can influence the way we make decisions about our finances.

In the 8th guide in our Investing Explained series, we explain what the most common biases are, how they can lead to poor decision making and how to avoid them. 

 

The guide includes: 

  • Loss aversion bias
  • Overconfidence
  • Confirmation bias
  • The endowment effect
  • Outcome bias
  • Know yourself
  • Have a plan

Or listen to our podcast, where Henry Cobbe, head of research at Elston Consulting, discuss the most common mistakes that investors make and how to mitigate against them. They also talk through how to approach investment research and the importance of seeking different sources. 

This series is sponsored by IG.

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This article is sponsored by IG.