Common Behavioral Biases That Lead to Bad Investing Decisions (Episode 150)

Updated: March 7, 2023

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What you’ll hear in this episode:

Are you a logical thinker? While we’d like to think that we’re rational in our thinking and decision-making, we can all sometimes fall victim to behavioral biases.

In this episode, we talk about three common behavioral biases that can lead us to bad investing decisions.


  • Overconfidence: the tendency to overestimate one’s abilities, knowledge, or predictions.
  • Loss Aversion: the tendency to feel the pain of losses more intensely than the pleasure of gains.
  • Confirmation Bias: the tendency to seek out and interpret information that confirms our existing beliefs while ignoring or dismissing information that contradicts it.

Excerpts and Highlights:

Behavioral biases are the irrational patterns of thinking and decision-making that affect our judgments and actions. They arise due to our cognitive and emotional limitations and often result in suboptimal choices that may not align with our best interests.

Overconfidence often leads people to take excessive risks, make hasty decisions, and ignore warning signs that suggest their beliefs might be wrong.

Loss aversion can cause people to avoid taking risks, even if the expected benefits outweigh the potential risks.

Confirmation bias leads people to misinterpret data or dismiss contrary evidence to their beliefs, which then prevents them from making a truly informed decision.

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