
Ten Types of Cognitive Biases That May Hurt Your Portfolio
Cognitive biases can have a negative impact on an investor’s ability to make rational decisions, potentially derailing their investment goals. These mental shortcuts and distortions that we make affect how you perceive information and thus make decisions, often leading, unfortunately, to poor investment choices. Cognitive biases in investing can lead to overconfidence, misjudgments, and a reliance on emotion rather than logic. But if you can recognize and address these biases before they impact your investment portfolios, you can avoid common pitfalls and make better choices that enhance portfolio performance over time.