Excess Returns, Ep. 28: The Danger of Focusing on What Should Be and Missing What Is

We all have our beliefs about the way that things should work in investing. When the market gets overvalued, we think it should go down. When value stocks struggle for a long period of time, we think they should outperform. When central banks or governments implement policies we don’t agree with, we think they will inevitably end in disaster. But that focus on the way we think things should be can sometimes lead us to… Read More

Three Things I Feel Strongly About – And Why I Might Be Wrong

By Jack Forehand, CFA (@PracticalQuant) Confirmation bias is one of the most damaging biases in investing. All of us want to be right. We all want to think that opinions that disagree with ours don’t have sensible arguments to support them. So we gravitate toward people who agree with ours. Whether it be in our personal relationships, or our virtual ones through things like social media, we all unconsciously want to seek out validation that… Read More

The Benefits of the Other Side

By Jack Forehand (@practicalquant) —   Polarization has become the new thing. Everyone seems to have such strong opinions one way or the other on every issue that they just can’t see how the opposite opinion to their own is even possible. They can’t see how a rational human being could think differently than them. Obviously, the biggest place we currently see this is in politics. More and more political opinions are cast in stone and are… Read More

Keeping Confirmation Bias at Bay

As emotional creatures, human beings are prone to a multitude of behavioral biases that can help them in daily life, but hurt them badly in the investing world. Even the best investors can slip up and let these biases lead them astray, so today we’ll take a look at an article written earlier this year on “confirmation bias” by Kiplinger’s Bob Frick. Confirmation bias, Frick writes, is “the human tendency not only to hear what… Read More

Avoid “Confirmation Bias”

In his latest Wall Street Journal column, Jason Zweig discusses one of the behavioral pitfalls that can drag down many investors’ portfolios: confirmation bias. What is confirmation bias? “In short,” Zweig explains, “your own mind acts like a compulsive yes-man who echoes whatever you want to believe. … A recent analysis of psychological studies with nearly 8,000 participants concluded that people are twice as likely to seek information that confirms what they already believe as… Read More