Risk particularly in finance and investment is often framed in cold and calculating terms, but such an approach can lead us to neglect its very human features.
More often than simply "an absence of certainty" risk is about our inability to deal with probabilities ( of gain and loss as markets go up and down) in a consistent and coherent fashion.
This causes discomfort.
How we experience and perceive risk is uniquely personal but at the same time certain trends are obvious.
4 common biases tend to exist among investors
More often than simply "an absence of certainty" risk is about our inability to deal with probabilities ( of gain and loss as markets go up and down) in a consistent and coherent fashion.
This causes discomfort.
How we experience and perceive risk is uniquely personal but at the same time certain trends are obvious.
4 common biases tend to exist among investors
- Overconfidence
- Reducing Regret
- Limited Attention Span;
- Chasing Trends
If you see yourself in any of these biases then the best way to avoid pitfalls of human emotion is to identify the emotion.
You cannot avoid all behavioural bias but you can minimize the effect.
"Be fearful when others are greedy and greedy when others are fearful". Warren Buffet.
Easier said than done - but then that's why execution is the key.
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