This book, Why smart people make big money mistakes and how to correct them, is now 25 years old, yet it still has great advice and lays out the foundation for our behavioral biases. This list of biases is long and have not been eliminated over since this book was published:
- mental accounting mistakes
- loss aversion and the sunk cost fallacy
- the endowment effect
- money illusion
- anchoring and confirmation biases
- overconfidence
- following the herd
Unfortunately, we still don't have a unified theory for biases, but we do have a reasonable solution. Follow rules and have a bias checklist to stop from making these mistakes. While this sounds simple, it has not been easy implement for many investors.
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