---
title: "These Five Cognitive Biases Hurt Investors the Most"
publisher: "Share Talk"
author: "sharetalk"
published: "2017-10-19T12:46:36+00:00"
modified: "2017-10-19T12:46:36+00:00"
date: 2017-10-19
canonical: "https://www.share-talk.com/these-five-cognitive-biases-hurt-investors-the-most/"
category: "Blogs"
categories: ["Blogs", "Learning and Investing"]
tags: ["Visual Capitalist"]
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---

# These Five Cognitive Biases Hurt Investors the Most

**Published:** October 19, 2017
**Author:** sharetalk
**Categories:** Blogs, Learning and Investing
**Tags:** Visual Capitalist
**Featured image:** ![](https://i0.wp.com/www.share-talk.com/wp-content/uploads/2023/11/Stencil-Google-Chrome-2023-04-19-at-2.47.43-PM.jpeg?fit=1231%2C615&quality=89&ssl=1)

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There is no shortage of cognitive biases out there that can trip up our brains.

By the last count, there are [188 types](http://www.visualcapitalist.com/every-single-cognitive-bias/) of these fallible mental shortcuts in existence, and they constantly impede our ability to make the best decisions about our careers, our relationships, and for building wealth over time.

## BIASES THAT PLAGUE INVESTORS

In today’s infographic from [StocksToTrade](http://stockstotrade.com/cognitive-biases/), we dive deeper into five of these cognitive biases – specifically the ones that really seem to throw investors and traders for a loop.

Next time you are about to make a major investing decision, make sure you double-check this list!

[!\[\](http://2oqz471sa19h3vbwa53m33yj.wpengine.netdna-cdn.com/wp-content/uploads/2017/10/cognitive-biases-trading.png)](http://www.visualcapitalist.com/five-cognitive-biases-hurt-investors/)

Courtesy of: [Visual Capitalist](http://www.visualcapitalist.com)

The moves that may seem instinctual for the average investor may actually be pre-loaded with cognitive biases.

These problems can even plague the most prominent investors in the world – just look at JPMorgan’s [Jamie Dimon](http://www.zerohedge.com/news/2017-10-13/jamie-dimon-breaks-promise-silence-says-people-who-buy-bitcoin-are-stupid)!

## BIASES TO AVOID

Here are descriptions and examples of the five cognitive biases that can impact investors the most:

**Anchoring Bias**

The first piece of information you see or hear often ends up being an “anchor” for others that follow.

As an example, if you heard that a new stock was trading at $5.00 – that is the piece of information you may reference whenever thinking about that stock in the future. To avoid this mental mistake: analyze historical data, but don’t hold historical conclusions.

**Recency Bias**

Recency bias is a tendency to overvalue the latest information available.

If you heard that a CEO is resigning from a company you own shares of, your impulse may be to overvalue this recent news and sell the stock. However, you should be careful, and instead focus on long-term trends and experience to come up with a more measured course of action.

**Loss Aversion Bias**

No one wants to lose money, but small losses happen all the time even for the best investors – especially on paper.

Loss aversion bias is a tendency to feel the effects of these losses more than wins of equal magnitude, and it can often result in a sub-optimal shift in investing strategy. Investors that are focused only on avoiding losses will miss out on big opportunities for gains.

**Confirmation Bias**

Taking in information only that confirms your beliefs can be disastrous. It’s tempting, because it is satisfying to see your previous conviction in a positive light – however, it also makes it possible to miss important findings that may help to change your conviction.

**Bandwagon Bias**

No one wants to get left out, but being the last one to pile onto an opportunity can also be cataclysmic. If you’re going to be a bandwagon jumper, make sure you’re doing it for the right reasons.

*Interested in more infographics on wealth and investing?

Help us make the first [Visual Capitalist book](https://www.kickstarter.com/projects/1861039958/visualizing-change-a-data-driven-snapshot-of-our-w) a reality on Kickstarter.*

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