Investing Psychology 101

#1

Anchoring Bias:

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It is a cognitive bias where an individual depends too heavily on an initial piece of information offered when making decisions.

Anchoring occurs when, during decision making, an individual depends on an initial piece of information to make subsequent judgments (Source: Wikipedia)

#2

(Source: Practical Psychology)

#3

Confirmation Bias:

Confirmation bias is the tendency to search for, interpret, favor, and recall information in a way that affirms one’s prior beliefs or hypotheses.

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Also read: 5 Psychology Traps that Investors Need to Avoid

#4

Loss aversion

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Loss aversion refers to people’s tendency to prefer avoiding losses to acquiring equivalent gains: it is better to not lose $5 than to find $5.

#5

Investing Psychology: Roller-coaster of emotions

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#6

Endowment effect

An emotional bias that causes individuals to value an owned object higher, often irrationally, than its market value.

#7

Herd Mentality:

Herd mentality, mob mentality or herding , describes how people can be influenced by their peers to adopt certain behaviours on a largely emotional, rather than rational, basis.

Herding is one of the biggest reason why people lose money while investing. Judging “collective” behaviour never do any good when it comes to making an important decision about investments. Most naturally, following what majority of people has chosen is always a tempting and “safe” option to go for. However, without foreseeing the background, one can’t be sure of any important decision.

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The first golden rule of investing is to avoid herd mentality!

#8

hi Kritesh

– I have never ever done anything in the STOCK market

I was having a software engineer career
where I was never able to work hard ( never liked it )
Lost my health

And am now in 13 lakhs DEBT

All the stuff you were talking about

Anchoring Bias:

12 Cognitive Biases

Confirmation Bias:

Also

Loss aversion

Investing Psychology: Roller-coaster of emotions

Endowment effect

Herd Mentality:

All these things
I am well aware of

As far as I know Cognition itself is very big subject !!!
There are 150 different kinds of biases
As long as people are concerned … Its ALWAYS biased …

#9

How do I get out of Debt 13 lakhs !!!
using the stock market
With very little money to invest !! ( 20 thousand rupees )

Is it ??? may god save me :slight_smile:

or is it possible !!!

#10

Hi @Ha_Re There’s a famous quote which goes like: "How to Eat an elephant? – One bite at a time!" If you try to eat the complete elephant at once, it will seem impossible. But, it you take small bites, it can be done.

Take small steps and try to payback in monthly instalments. Else, you’ll even lose your 20k by investing in very risky stocks!