Anchoring bias The cognitive bias of anchoring is when your decision is influenced by the first thing you heard, saw, or read. It is the reference point or anchoring point on where your future decisions are made. Let me give you a simple example. You want to buy a plain cup of coffee to go … More Anchoring Is Just Dead Weight
We know the saying about dating. “Don’t fishing from the company pond,” which means don’t date anyone from the company you are working for because if the relationship does not work out, you will see that person every day, which would be awkward. Funny that the same is true for investing more money in the … More Don’t Invest in the Company Pond
If you believe in the efficient market theory (EMT), which states that the current stock price reflects all important information, whether known or unknown to the investor, then the only way to make money on the stock market is through speculation or buying on luck. This is the rational explanation of the market if everyone … More Option Trading Tip to Profit from Uncertainty
Commitment Game To succeed in athletics and in life, commitment is tantamount to success. You need to be committed to the cause, to the company, and to the team. However, commitment can also blind you from new information that shows your current path is wrong. The more you commit to something, either time, resources, or … More New Mind Game
With President Biden’s veto on overturning a retirement investment rule that would take into account the impact of climate change and other environmental, social, and governance (ESG) factors, let’s talk about your emotions that may lead you to invest in or not invest in certain stocks like ESG, sin stocks, big oil, or big companies. … More Is ESG or Sin Stock Investing Good or Bad?
The insolvency of Silicon Valley Bank (SVB) occurred very fast. One day they are doing fine and the next they are out of money. This is technically true but this does not mean they are insolvent or bankrupt at that time. Their bankruptcy was not due to a lack of assets but a lack of … More Silicon Valley Bank and Herd Mentality
To sell or not to sell, that is the question. Whether tis nobler in the mind to sell your losers and gain some tax advantages or suffer the sling and arrows and hope for a rebound in the new year. Lost in Semi-Crypto Let me tell you, I feel the pain of loss aversion and … More Taking Stock of Your Stocks at EOY
I have invested in poorly managed companies or companies that have never made money, but I made a great return on them. And there are good companies that make great investments. It comes down to risk and reward, risk tolerance, and is your focus on short-term or long-term goals. Let’s first define what a good … More Why Good Companies May Not Be Good Investments
Newton’s First Law of Motion states that a body at rest will remain at rest unless an outside force acts on it, and a body in motion at a constant velocity will remain in motion unless acted upon by an outside force. This is status quo bias. But let’s dig a bit deeper into why … More Top 4 Tips to Overcome Status Quo Bias in Investing
The sunk cost effect considers past non-recoverable costs, time, or resources in deciding the future. In other words, whatever effort, money, or time you have put into an investment does not matter when looking at the investment in the present and predicting the future. The sunk cost effect varies by the cost or effort put … More Don’t Let Sunk Costs Sink Your Finances
Behavioral Investing and Finance 