Glossary entry
Bias is a systematic tendency in judgment that can distort how investment information is selected or interpreted. Confirmation bias favors evidence supporting an existing belief, while anchoring places excessive weight on a reference point. Structured decisions, written assumptions, and deliberate consideration of contrary evidence can help identify these tendencies without making anyone immune to them.
Illustrative example
An investor reads only favorable reports about a share already owned and dismisses weaker cash-flow evidence. This selective attention can reinforce an unsupported original view.
What to consider
Confidence is not evidence. Review the reasons for a position independently of its purchase price, recent performance, or emotional attachment.
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