When talking about investing, we often fall into the trap of incorrect beliefs and biases. These biases cloud our judgment, leading to poor decisions. As Niels Bohr said, the goal of science is to gradually eliminate biases. The same applies to investing. Reducing biases and viewing situations objectively is crucial.
1. Why Biases Hinder Investing
Biases limit our thinking. For example, many people think of the stock market as gambling. This bias stems from the belief that stocks are just flashing tickers. However, stocks represent ownership in a company. Overcoming this bias allows for more careful evaluation of stocks and a long-term investment perspective.
In the movie Wall Street, Gordon Gekko says, “I don’t throw darts at a board. I bet on sure things.” This reinforces the bias that sure things exist. In reality, investing is a series of uncertainties. It’s important to discard this bias and embrace uncertainty.
2. Ways to Reduce Biases
To reduce biases, first, recognize what biases you hold. Here are some ways to achieve this:
- Listen to diverse opinions
- Avoid only associating with like-minded people
- Continuously learn and accept new information
Successful investors like Graham, Buffett, and Munger constantly learned and embraced diverse perspectives to overcome biases. They did not succumb to greed or fear and viewed investments from a long-term perspective.
3. Controlling Emotions and Behavior
In investing, rational analysis is important, but so is controlling emotions and behavior. It’s necessary to analyze situations calmly without being swayed by market volatility. Managing stress through meditation, exercise, or hobbies can help.
Many investors make emotional decisions influenced by market volatility, often leading to poor outcomes. Thus, it’s crucial to control emotions and analyze situations rationally.
4. The Importance of Continuous Learning
To reduce biases and make better decisions, continuous learning is essential. The world is constantly changing, and acquiring new information and knowledge is important. This allows us to view situations more objectively.
Darwin’s theory of evolution gradually removed the bias that humans are special creations distinct from other species. Similarly, new knowledge helps us overcome existing biases.
Conclusion: Overcoming Biases to Become a Better Investor
Investing is a process of continuous learning and overcoming biases. We must constantly acquire new information and discard existing biases to grow. Through this process, you can become a better investor. Focus on overcoming biases and making better decisions. May your investments be successful.
Reference: Safal Niveshak, “Investing and the Art of Getting Less Prejudiced”