Most people think that investors Always invest rationally. I would like to know if there are any investors who have a “bias” towards investing or not?
Sometimes people tend to think Those “decisions” are made for a reason. But in fact, investors’ financial decisions are often “biased” and “biased” by emotions and psychology. The “5 investment biases” that contribute to investors making mistakes and did not reach the goal
1. Confirmation bias (bias that blocks different opinions)
Humans often choose to receive information that supports their previous beliefs. and reject conflicting information To confirm your own beliefs This is the basic bias that makes investors Most common investment mistakes
2. Experiential Bias (memory bias)
Every day we receive a lot of information. Makes memory space limited Humans tend to rely on the latest information to make decisions more than past information. In terms of investment This bias will make investors Make investment decisions by giving weight to events. That just happened too much. Until it may cause the way of thinking or decision making to be inaccurate. from what it should be
3. Loss Aversion (loss avoidance bias)
Daniel Kahneman, American psychologist who won the Nobel Prize in Economics It has been said that People hate losses more than they rejoice in gains. Therefore, it is not surprising that investors When faced with short-term fluctuations in the market that cause Asset prices fall Investors will have the behavior of avoiding losses (loss aversion) by not selling the assets and holding the losses for too long or vice versa. Choosing to sell off that asset too quickly To reduce losses that may occur and return to invest again during the market recovery This will cause investors to purchase assets. at a more expensive price than before
4. Sunk Cost Fallacy (sunk cost bias)
People often feel that the value they lose outweighs the value they gain. Therefore, it is the reason why Investors are stuck. with investing in assets in which one has invested money or invested heavily in investment planning, even if that asset no longer meets the investment needs Because they regret the costs that have already been sunk and expect that in the future that asset will return to making a profit to compensate for the current loss. This may cause investors to choose to invest longer than they should. and increase risk to your investment portfolio Until leading to large damage
5. Familiarity Bias (familiarity bias)
By relying on information or experience that you are familiar with Investors tend to choose Invest in things that you are familiar with. Using familiarity as a shortcut in making investment decisions rather than a realistic assessment of the situation.
One important factor that causes investment mistakes is Investors don’t know themselves, so before starting to invest, you should examine your own investment style first. Then it will be possible Select stocks and investment strategies appropriately
Currently there are 7 popular investment styles as follows:
1. Value Investing It is an investment style that focuses on choosing companies with strong fundamentals. It is priced lower than its basic value.
2. Growth Investing It is an investment that focuses on growth. By choosing stocks that can Expanded faster than businesses in the same industry group
3. Momentum Investing It is a trend-based investment. Considered by factors that is affecting investors’ decisions and money during that time, so it is necessary to use information that is relatively updated, close, and up to date with various investment news in the short term
4. Contrarian Investing It is a type of investment that goes against the market. An important strategy is to look for investment opportunities when the market is in a state of being too optimistic (Greed) or too pessimistic (Fear) and sell at an appropriate price level. which is suitable for the beginning period There are signs of saturation. or the value of the company has decreased to an appropriate point
5. Income Investing It is an investment that focuses on returns from investment in addition to Capital Gain is a return in the form of income, dividends, and interest received from investments.
6. Active Investing It is an investment that requires the diligence and skill of the investor. In trying to create returns higher than the overall market May choose to create returns from short-term fluctuations Or it may result from adjusting investment portfolios according to various investment asset groups.
7. Passive Investing It emphasizes investing in buying and holding for a long period of time (Buy and Hold). Therefore, choose investment assets that are well diversified to reduce risk. Suitable for investors who do not expect quick profits or daily price movements. The main principle is that investors must believe that investing in risky assets that are diversified. and invest to get returns tied to the index will be able to create returns for the long term, so it is suitable for investing at any time
However, no matter what type of investment strategy, there is always risk involved. Investors must carefully consider information and factors that may affect asset prices. Before deciding to invest Because no strategy will be good all the time. Importantly, there are no investors. There will always be profit or loss as well. Just be disciplined. Have clear principles and strategies that are consistent with your investment style.
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2024-02-26 01:11:00
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