Investors often fall victim to cognitive biases when making decisions from "summary" of Beyond Greed and Fear:Understanding Behavioral Finance and the Psychology of Investing by Hersh Shefrin
Investors frequently make decisions based on cognitive biases, which can lead to suboptimal outcomes. These biases are systematic errors in thinking that can affect judgment and decision-making. One common bias is overconfidence, where investors believe they have more knowledge or information than they actually do, leading them to take on more risk than they should. This can result in poor investment choices and losses.
Another cognitive bias is confirmation bias, where investors seek out information that confirms their existing beliefs and ignore information that contradicts them. This can lead to a narrow view of the market and a reluctance to consider alternative perspectives. As a result, investors may miss important signals and make decisions based on flawed logic.
Loss aversion is another bias that can impact investment decisions...
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