How to improve our investing game?

High Quality Financial Education Made Simple

Master Investor
May 16, 2023

Recognize our biases, apply information filtering, and fool ourselves into thinking the opposite

We're discussing the significance of challenging our own biases in light of the world's rapid change. How to improve our investing game?

In order to become better at business and investing, then it's time to forget everything we think we know.

Three topics will be covered in this issue:

Understanding our biases
In the Information Age, information is filtered
How to swindle ourselves into thinking the opposite

We can stop making decisions based on erroneous assumptions and emotions and replace them with reasonable, rule-based reasoning by becoming aware of our own biases. And that gives us an advantage in this investing game.

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Lesson 1: The Preconceived Ideas

Investment biases produce hasty judgments and ignored hazards. The most typical investment biases include:

Confirmation bias - is the tendency to look for data that supports your current ideas
Overconfidence bias - the tendency to overestimate one's own skills or knowledge
Herd mentality - is the tendency to act without independent thought

Knowing "framing bias"—the reasons behind how and why information is given to us and how we interpret it—is crucial.

The way things are framed makes such a difference to our perception. We must make an effort to block out the noise.

Lesson 2: The Information Age

The financial industry is evolving quickly. Investors are less dependent on gatekeepers as a result of the democratization of information.

However, democratized information also refers to democratized falsehoods.

Nowadays, there is too much information. That is why organize information is priceless and can make us wealthy. We must research material that prompts us to reconsider our own ideas from reliable sources.

When information overload sets in, the majority of us tend to turn to what we already believe to be true. This safety mechanism results in lost chances and unanticipated threats.

As inside investors, it is our responsibility to not just read the news that supports our bias but, more crucially, to research the news that challenges it.

Level 3: Counterintuitive Thinking

Our confirmation biases will be pushed by even little adjustments to our regular routine.
Every day, read a different newspaper instead of relying on the same one.
To keep our body and mind on their toes, vary our everyday exercise routine.

Prepare a dish we would never ordinarily attempt.

We are forced to give up our egos when we venture outside of our comfort zones.

We need to acknowledge that. The finest investors are humble enough to own our errors because the market is smarter than we are all.

This highlights one tactic—contrarian investing—that goes against our own prejudices and herd instincts.

Although going along with the crowd seems like the right thing to do, great investors are those who think for themselves and have invested in their financial education. Over time, if we are a contrarian, we will make money.

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