Illusion of control can cloud judgment in investing from "summary" of Beyond Greed and Fear:Understanding Behavioral Finance and the Psychology of Investing by Hersh Shefrin
The illusion of control can lead investors to overestimate their ability to predict the outcomes of their investments. When individuals believe that they have control over a situation, they tend to be more confident in their decisions. This confidence can cloud judgment and lead to risky investment choices. Investors may feel that they have the power to influence the market or the performance of a particular asset, when in reality, there are numerous external factors at play that are beyond their control. This illusion of control can be especially dangerous in the world of investing, where uncertainty and unpredictability are inherent. Despite the best efforts of investors to research, analyze, and strategize, the market can still behave irrationally and unexpectedly. By assuming that they have more control than they actually do, investors may take on unnecessary risks or fail to adequately diversify their portfolios. F...
Similar Posts
Be proactive in financial planning
Being proactive in financial planning means taking control of your financial future by actively making decisions and taking act...
Our upbringing shapes our money mindset
As we journey through life, our relationship with money is significantly influenced by our upbringing. The environment in which...
Cultivate a mindset of resilience and perseverance
To succeed in the world of investing, one must cultivate a mindset of resilience and perseverance. This means being able to bou...
Emotions can cloud financial judgment
When it comes to making financial decisions, emotions can often get in the way of sound judgment. People tend to let their feel...
Investing should be based on solid research and analysis
Investing is a serious business, and it should not be taken lightly. It requires careful consideration and thoughtful decision-...
Efficient market hypothesis suggests stock prices reflect all available information
The efficient market hypothesis suggests that stock prices reflect all available information. This means that the prices of sto...
Avoid market timing
Trying to time the market is a fool’s errand. It’s incredibly difficult to predict when to buy or sell investments based on mar...
Keep it simple
The principle of simplicity is a cornerstone of successful investing. By keeping your investment strategy simple, you can avoid...
Understand the concept of compounding and its impact on returns
Compounding is a fundamental concept in investing that is often overlooked or misunderstood by many investors. It is the proces...
Ignore the noise
When it comes to investing, it's easy to get caught up in the noise of the market. The constant stream of news, opinions, and p...
