Understanding cognitive biases can improve decisionmaking from "summary" of Your Money and Your Brain by Jason Zweig
By recognizing and understanding the cognitive biases that influence our decision-making, we can ultimately improve our ability to make more rational and informed choices. These biases, which are deeply ingrained in our brains, can lead us astray by causing us to make decisions based on emotions, intuition, or faulty reasoning rather than objective facts and logic. When we are unaware of these biases, we are more susceptible to making poor financial decisions that can have negative consequences on our wealth and well-being. One of the most common cognitive biases that can impact our decision-making is overconfidence. This bias causes us to have an inflated sense of our own abilities and knowledge, leading us to take on more risk than we should and make reckless investment choices. By understanding that we are prone to overestimating our skills and underestimating the risks involved, we can take steps to counteract this bias by seeking out diverse perspectives, conducting thorough research, and consulting with experts before making important financ...
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