{"id":935,"date":"2020-06-24T15:35:00","date_gmt":"2020-06-24T20:35:00","guid":{"rendered":"https:\/\/www.bellvest.ca\/winnipeg\/resources\/5-more-investment-biases\/"},"modified":"2025-09-24T14:41:00","modified_gmt":"2025-09-24T19:41:00","slug":"5-more-investment-biases","status":"publish","type":"resources","link":"https:\/\/www.bellvest.ca\/winnipeg\/resources\/5-more-investment-biases\/","title":{"rendered":"5 more biases that are hurting your investments"},"content":{"rendered":"

In\u00a0part one<\/a><\/strong>\u00a0<\/strong>of this article series we introduced you to Daniel Kahneman\u2019s fast and slow thinking. Fast thinking (\u201csystem 1 thinking\u201d) uses mental short cuts to help us react quickly, making it well suited for knee-jerk life-and-death decision-making. Slow thinking (\u201csystem 2 thinking\u201d), uses carefully gathered evidence and a disciplined evaluation process to make decisions, making it well suited for complex, life altering decisions that don\u2019t involve tigers.<\/p>\n

<\/p>\n

The short cuts of fast thinking introduce bias and inaccuracy into our processes and can affect the quality of the decisions we make. In part one, we covered five biases that are probably compromising your investment decisions: availability bias, representativeness bias, affect bias, overconfidence bias and hindsight bias. This time we cover five more biases, plus signs to look out for and steps to take to slow your thinking down.<\/p>\n

Herd bias: We’re most comfortable in a crowd<\/strong><\/p>\n

Humans have a herd mentality. In general, we\u2019re more comfortable following others than striking out on our own and we feel good about our decisions when we see others doing the same things. It\u2019s why people join long lines at food festivals\u2014the more people in the line, the better the food must be, right? Not necessarily. Long food lines are more likely a comment on human psychology than culinary quality.<\/p>\n

Financial markets are affected by the herd mentality as well. A few people jump on a new stock or invest in a country, then more join in. Eventually the trend becomes a fad, then a bubble which ultimately bursts. It happened with the Dutch tulip frenzy in the 1600s, the South Sea Island bubble of the 18th\u00a0century, the U.S. stock market boom of the \u201820s and, more recently, the tech boom and real estate bubble of the early 2000s.<\/p>\n

Signs<\/strong>:<\/strong>\u00a0You have a hard time trusting your own judgement of an investment\u2019s value, instead altering your opinion based on what others say and do. You\u2019re influenced by the behaviour of other investors. When they sell or buy, you do too.<\/p>\n

What to do about it<\/strong>:<\/strong>\u00a0Do your research or work with a portfolio manager that will. Investigate why people are jumping on a particular investment opportunity to determine whether they\u2019re simply following the crowd or if they have solid reasons for their decision.<\/p>\n

\n

Loss aversion: We hate to lose more than we like to win<\/strong><\/p>\n

Research has shown that people are more emotionally affected by losses than gains. In other words, the pleasure we experience when we gain something is less than the pain we feel when we lose, even when the value of the gain or loss is exactly the same. This leads us to work harder and take greater risks to avoid losing than to keep winning. This bias is known as \u201crisk aversion.\u201d\u00a0<\/span><\/p>\n

Signs<\/strong>:<\/strong>\u00a0You\u2019re reluctant to sell anything that will result in a loss. You\u2019re more likely to sell something that\u2019s made a gain than hold onto it. You accept higher levels of risk in order to avoid the potential of losses.<\/p>\n

What to do about it<\/strong>:<\/strong>\u00a0Look more rationally at the costs and benefits of different options, recognizing that your instinct is to avoid losses. Focus on how your portfolio is performing as a whole, rather than on what one investment may be doing at a particular point in time. By definition, portfolio diversification means that not all investments will be trending in the same direction at the same time. Keep in mind the final level of wealth you can attain, rather than viewing losses and gains relative to a subjective reference point.<\/p>\n

Ambiguity aversion: Better the devil we know<\/strong><\/p>\n

Very few people like uncertainty. This leads us to be more comfortable with known risks (the devil we know) than unknown risks (the devil we don\u2019t), to the point where we\u2019ll choose an option known to be high risk over an option with unknown risks, even though the unknown risk could be zero. We\u2019ll also choose an option with known odds of winning over an option with unknown odds, even though the unknown odds could be a guarantee that we\u2019ll win. And in all cases, we rationalize our choices by saying they\u2019re based on probability, even though they\u2019re not really.<\/p>\n

Signs<\/strong>:<\/strong>\u00a0You steer clear of investment types, companies, countries and sectors you don\u2019t know well. You stick with income over growth because interest rates are known and growth is uncertain. You invest primarily in Canadian investments versus looking for the best global investment opportunities. You think you\u2019re making rational assessments of risk, but then the unexpected happens and you find yourself saying \u201cHow is that even possible?\u201d<\/p>\n

What to do about it<\/strong>:<\/strong>\u00a0Be aware that you may want to avoid ambiguity so much that you\u2019re using probability incorrectly. Fact check your calculations with someone who knows math well. Consider broadening your investment horizon beyond what you know, or work with a portfolio manager that specializes in investing outside Canada.<\/p>\n

Anchoring bias: What we hear first sticks best<\/strong><\/p>\n

One way to speed up decision-making is to use a reference point to judge the value or merit of different options. The reference point is often the first piece of information we receive and may be otherwise irrelevant to our decision-making. It becomes an \u201canchor\u201d against which we weigh all subsequent information, hence the name \u201canchoring bias.\u201d<\/p>\n

A sparkling example of anchoring is the two-months\u2019 salary campaign by DeBeers in the 1930s. By telling men they should spend two months\u2019 salary on an engagement ring\u2014an arbitrary number\u2014suddenly there was a reference point for what a ring should cost, and an expectation that a good fianc\u00e9 would shell out at least that much. Outside of the diamond business, acquisition prices or highest prices paid often become anchors for investors.<\/p>\n

Signs<\/strong>:<\/strong>\u00a0You\u2019re holding onto investments that you should sell because you\u2019re anchoring their value to their original price rather than more important criteria.<\/p>\n

What to do about it<\/strong>:<\/strong>\u00a0Be on the lookout for anchors. When you\u2019re using a reference point, ask yourself if it\u2019s relevant or not. Use data instead of suppositions to make decisions.<\/p>\n

<\/h3>\n

Confirmation bias: We don’t like to change our minds<\/strong><\/p>\n

We\u2019re using this shortcut, called \u201cconfirmation bias,\u201d when we look for information that confirms our pre-existing beliefs and ignore evidence that goes against those beliefs. In part, this bias exists because we find it easier to understand positively framed information.<\/p>\n

Confirmation bias can affect investment professionals as well as individual investors. We\u2019re vulnerable to confirmation bias when we look for strategies that work instead of strategies that don\u2019t work, products to buy rather than ones to avoid, and evidence that what we\u2019re doing is right not wrong.<\/p>\n

Signs<\/strong>:<\/strong>\u00a0You rarely change your mind about whether an investment is a good or poor option. You only listen to advice and accept facts that prove your point. When doing your due diligence, you phrase your questions in ways that will lead to confirming statements.<\/p>\n

What to do about it<\/strong>:<\/strong>\u00a0When doing research, spend most of your time seeking out contrary opinions and evidence. Ask questions that will challenge your pre-existing beliefs. Test and retest your investment process.<\/p>\n

In this article we\u2019ve covered herd bias (our tendency to follow the crowd), uncertainty aversion (our bias towards known risks), risk aversion (our focus on avoiding loss over securing gain), anchoring bias (making decisions using an arbitrary reference point), and confirmation bias (seeking evidence that confirms our beliefs).<\/p>\n

It\u2019s important to be aware of the signs that you\u2019re using your fast, flawed, biased system 1 brain to make investment decisions. The next step is to invest the time and do the hard work needed for slow, disciplined system 2 thinking. Look for contrary evidence, listen to opposing opinions, rely on data, know probability, question your feelings, and understand where your biases come from. It\u2019s the only way to feel confident that your investment decisions are, in fact, based on logic, probability and relevant evidence and not on gut feeling, stereotypes and other mental shortcuts.<\/p>\n","protected":false},"featured_media":2146,"template":"","resources-categories":[20],"resources-type":[7],"class_list":["post-935","resources","type-resources","status-publish","has-post-thumbnail","hentry","resources-categories-wealth-planning","resources-type-blog-post"],"yoast_head":"\n5 more biases that are hurting your investments - Winnipeg BIM<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.bellvest.ca\/winnipeg\/resources\/5-more-investment-biases\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"5 more biases that are hurting your investments\" \/>\n<meta property=\"og:description\" content=\"In\u00a0part one\u00a0of this article series we introduced you to Daniel Kahneman\u2019s fast and slow thinking. Fast thinking (\u201csystem 1 thinking\u201d) uses mental short cuts to help us react quickly, making it well suited for knee-jerk life-and-death decision-making. Slow thinking (\u201csystem 2 thinking\u201d), uses carefully gathered evidence and a disciplined evaluation process to make decisions, making […]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.bellvest.ca\/winnipeg\/resources\/5-more-investment-biases\/\" \/>\n<meta property=\"og:site_name\" content=\"Winnipeg BIM\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/bellwetherinvestments\/\" \/>\n<meta property=\"article:modified_time\" content=\"2025-09-24T19:41:00+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.bellvest.ca\/winnipeg\/wp-content\/uploads\/sites\/44\/2025\/09\/biases-hurting-your-investments.png\" \/>\n\t<meta property=\"og:image:width\" content=\"1200\" \/>\n\t<meta property=\"og:image:height\" content=\"600\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/png\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"7 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/www.bellvest.ca\\\/winnipeg\\\/resources\\\/5-more-investment-biases\\\/\",\"url\":\"https:\\\/\\\/www.bellvest.ca\\\/winnipeg\\\/resources\\\/5-more-investment-biases\\\/\",\"name\":\"5 more biases that are hurting your investments - Winnipeg BIM\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.bellvest.ca\\\/winnipeg\\\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\\\/\\\/www.bellvest.ca\\\/winnipeg\\\/resources\\\/5-more-investment-biases\\\/#primaryimage\"},\"image\":{\"@id\":\"https:\\\/\\\/www.bellvest.ca\\\/winnipeg\\\/resources\\\/5-more-investment-biases\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/www.bellvest.ca\\\/winnipeg\\\/wp-content\\\/uploads\\\/sites\\\/44\\\/2025\\\/09\\\/biases-hurting-your-investments.png\",\"datePublished\":\"2020-06-24T20:35:00+00:00\",\"dateModified\":\"2025-09-24T19:41:00+00:00\",\"breadcrumb\":{\"@id\":\"https:\\\/\\\/www.bellvest.ca\\\/winnipeg\\\/resources\\\/5-more-investment-biases\\\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\\\/\\\/www.bellvest.ca\\\/winnipeg\\\/resources\\\/5-more-investment-biases\\\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/www.bellvest.ca\\\/winnipeg\\\/resources\\\/5-more-investment-biases\\\/#primaryimage\",\"url\":\"https:\\\/\\\/www.bellvest.ca\\\/winnipeg\\\/wp-content\\\/uploads\\\/sites\\\/44\\\/2025\\\/09\\\/biases-hurting-your-investments.png\",\"contentUrl\":\"https:\\\/\\\/www.bellvest.ca\\\/winnipeg\\\/wp-content\\\/uploads\\\/sites\\\/44\\\/2025\\\/09\\\/biases-hurting-your-investments.png\",\"width\":1200,\"height\":600},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\\\/\\\/www.bellvest.ca\\\/winnipeg\\\/resources\\\/5-more-investment-biases\\\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\\\/\\\/www.bellvest.ca\\\/winnipeg\\\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Resources\",\"item\":\"https:\\\/\\\/www.bellvest.ca\\\/winnipeg\\\/resources\\\/\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"5 more biases that are hurting your investments\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\\\/\\\/www.bellvest.ca\\\/winnipeg\\\/#website\",\"url\":\"https:\\\/\\\/www.bellvest.ca\\\/winnipeg\\\/\",\"name\":\"Winnipeg BIM\",\"description\":\"\",\"publisher\":{\"@id\":\"https:\\\/\\\/www.bellvest.ca\\\/winnipeg\\\/#organization\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\\\/\\\/www.bellvest.ca\\\/winnipeg\\\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\\\/\\\/www.bellvest.ca\\\/winnipeg\\\/#organization\",\"name\":\"Winnipeg BIM\",\"url\":\"https:\\\/\\\/www.bellvest.ca\\\/winnipeg\\\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/www.bellvest.ca\\\/winnipeg\\\/#\\\/schema\\\/logo\\\/image\\\/\",\"url\":\"https:\\\/\\\/www.bellvest.ca\\\/winnipeg\\\/wp-content\\\/uploads\\\/sites\\\/44\\\/2025\\\/06\\\/Bellwether-Logo.svg\",\"contentUrl\":\"https:\\\/\\\/www.bellvest.ca\\\/winnipeg\\\/wp-content\\\/uploads\\\/sites\\\/44\\\/2025\\\/06\\\/Bellwether-Logo.svg\",\"width\":200,\"height\":54,\"caption\":\"Winnipeg BIM\"},\"image\":{\"@id\":\"https:\\\/\\\/www.bellvest.ca\\\/winnipeg\\\/#\\\/schema\\\/logo\\\/image\\\/\"},\"sameAs\":[\"https:\\\/\\\/www.facebook.com\\\/bellwetherinvestments\\\/\",\"https:\\\/\\\/www.linkedin.com\\\/company\\\/bellwether-investment-management-inc\",\"https:\\\/\\\/www.youtube.com\\\/@BIMInc.\"]}]}<\/script>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"5 more biases that are hurting your investments - Winnipeg BIM","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.bellvest.ca\/winnipeg\/resources\/5-more-investment-biases\/","og_locale":"en_US","og_type":"article","og_title":"5 more biases that are hurting your investments","og_description":"In\u00a0part one\u00a0of this article series we introduced you to Daniel Kahneman\u2019s fast and slow thinking. Fast thinking (\u201csystem 1 thinking\u201d) uses mental short cuts to help us react quickly, making it well suited for knee-jerk life-and-death decision-making. Slow thinking (\u201csystem 2 thinking\u201d), uses carefully gathered evidence and a disciplined evaluation process to make decisions, making […]","og_url":"https:\/\/www.bellvest.ca\/winnipeg\/resources\/5-more-investment-biases\/","og_site_name":"Winnipeg BIM","article_publisher":"https:\/\/www.facebook.com\/bellwetherinvestments\/","article_modified_time":"2025-09-24T19:41:00+00:00","og_image":[{"width":1200,"height":600,"url":"https:\/\/www.bellvest.ca\/winnipeg\/wp-content\/uploads\/sites\/44\/2025\/09\/biases-hurting-your-investments.png","type":"image\/png"}],"twitter_card":"summary_large_image","twitter_misc":{"Est. reading time":"7 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/www.bellvest.ca\/winnipeg\/resources\/5-more-investment-biases\/","url":"https:\/\/www.bellvest.ca\/winnipeg\/resources\/5-more-investment-biases\/","name":"5 more biases that are hurting your investments - Winnipeg BIM","isPartOf":{"@id":"https:\/\/www.bellvest.ca\/winnipeg\/#website"},"primaryImageOfPage":{"@id":"https:\/\/www.bellvest.ca\/winnipeg\/resources\/5-more-investment-biases\/#primaryimage"},"image":{"@id":"https:\/\/www.bellvest.ca\/winnipeg\/resources\/5-more-investment-biases\/#primaryimage"},"thumbnailUrl":"https:\/\/www.bellvest.ca\/winnipeg\/wp-content\/uploads\/sites\/44\/2025\/09\/biases-hurting-your-investments.png","datePublished":"2020-06-24T20:35:00+00:00","dateModified":"2025-09-24T19:41:00+00:00","breadcrumb":{"@id":"https:\/\/www.bellvest.ca\/winnipeg\/resources\/5-more-investment-biases\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.bellvest.ca\/winnipeg\/resources\/5-more-investment-biases\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.bellvest.ca\/winnipeg\/resources\/5-more-investment-biases\/#primaryimage","url":"https:\/\/www.bellvest.ca\/winnipeg\/wp-content\/uploads\/sites\/44\/2025\/09\/biases-hurting-your-investments.png","contentUrl":"https:\/\/www.bellvest.ca\/winnipeg\/wp-content\/uploads\/sites\/44\/2025\/09\/biases-hurting-your-investments.png","width":1200,"height":600},{"@type":"BreadcrumbList","@id":"https:\/\/www.bellvest.ca\/winnipeg\/resources\/5-more-investment-biases\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/www.bellvest.ca\/winnipeg\/"},{"@type":"ListItem","position":2,"name":"Resources","item":"https:\/\/www.bellvest.ca\/winnipeg\/resources\/"},{"@type":"ListItem","position":3,"name":"5 more biases that are hurting your investments"}]},{"@type":"WebSite","@id":"https:\/\/www.bellvest.ca\/winnipeg\/#website","url":"https:\/\/www.bellvest.ca\/winnipeg\/","name":"Winnipeg BIM","description":"","publisher":{"@id":"https:\/\/www.bellvest.ca\/winnipeg\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.bellvest.ca\/winnipeg\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/www.bellvest.ca\/winnipeg\/#organization","name":"Winnipeg BIM","url":"https:\/\/www.bellvest.ca\/winnipeg\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.bellvest.ca\/winnipeg\/#\/schema\/logo\/image\/","url":"https:\/\/www.bellvest.ca\/winnipeg\/wp-content\/uploads\/sites\/44\/2025\/06\/Bellwether-Logo.svg","contentUrl":"https:\/\/www.bellvest.ca\/winnipeg\/wp-content\/uploads\/sites\/44\/2025\/06\/Bellwether-Logo.svg","width":200,"height":54,"caption":"Winnipeg BIM"},"image":{"@id":"https:\/\/www.bellvest.ca\/winnipeg\/#\/schema\/logo\/image\/"},"sameAs":["https:\/\/www.facebook.com\/bellwetherinvestments\/","https:\/\/www.linkedin.com\/company\/bellwether-investment-management-inc","https:\/\/www.youtube.com\/@BIMInc."]}]}},"_links":{"self":[{"href":"https:\/\/www.bellvest.ca\/winnipeg\/wp-json\/wp\/v2\/resources\/935","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.bellvest.ca\/winnipeg\/wp-json\/wp\/v2\/resources"}],"about":[{"href":"https:\/\/www.bellvest.ca\/winnipeg\/wp-json\/wp\/v2\/types\/resources"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.bellvest.ca\/winnipeg\/wp-json\/wp\/v2\/media\/2146"}],"wp:attachment":[{"href":"https:\/\/www.bellvest.ca\/winnipeg\/wp-json\/wp\/v2\/media?parent=935"}],"wp:term":[{"taxonomy":"resources-categories","embeddable":true,"href":"https:\/\/www.bellvest.ca\/winnipeg\/wp-json\/wp\/v2\/resources-categories?post=935"},{"taxonomy":"resources-type","embeddable":true,"href":"https:\/\/www.bellvest.ca\/winnipeg\/wp-json\/wp\/v2\/resources-type?post=935"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}