For anyone that’s ever taken a Psychology or Behavioral Science class, you probably learned about something called “cognitive bias” (if you remember learning it… now that’s a different story).  Cognitive biases include a wide array of observed effects in social psychology that explain many of our inherently human biases.  Rather than looking at another technical side of investing, I thought it’d be neat to explore the behavioral side of investing and how cognitive biases play a role in it.  The six cognitive biases that I’ll explore are:

1. Confirmation Bias
2. Hindsight Bias
3. Fundamental Attribution Error
4. Anchoring
5. Framing
6. Self-serving Bias

Why is this important information to know? If we realize that we act upon our cognitive biases and understand why we do it, then we can look to change our behavior and become a smarter investor.

Tomorrow…..  Confirmation Bias