Familiarity bias leads investors to favor investments they are familiar with from "summary" of The Little Book of Behavioral Investing by James Montier
One of the most common biases that plague investors is the tendency to favor investments that they are familiar with. This familiarity bias can lead investors to overlook potentially more profitable opportunities simply because they are not as well-known or understood. Investors often feel more comfortable investing in companies or industries that they are already familiar with, even if those investments may not be the most rational or profitable choice. This bias can result in a lack of diversification in a portfolio, as investors may concentrate their investments in familiar sectors or companies, leaving them vulnerable to significant losses if those particular investments underperform. The familiarity b...
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