Since I first stumbled upon it around 2 years ago, I’ve been consistently reminded (especially during these er “unique” financial times) of how important it is for every investor, nay, for anyone to be aware of the most common manifestations of human cognitive bias.
While hardly an exhaustive, academically rigorous presentation, I strongly suggest each and every one of you reads this list of cognitive biases – and even better, try to catch yourself exhibiting them.
Seriously, you don’t need a degree in Psychology to get the point. The human brain, even the most disciplined, aware, and cognizant one is susceptible to these mental shortcuts. The implication for investors is that once informed, we can not only catch ourselves taking these shortcuts before its too late, but more importantly, recognize when others are doing the same, and capitalize on the situation.
Yes, I just linked to Wikipedia. If its not immediately apparent why, well, frankly, I’m not sure I can help you.