5 behavioural biases to avoid while building your portfolio

Imagine having a team of loyal assistants whose sole job is to nod and agree with everything you say. Sounds great, right? Well, meet confirmation bias — the ultimate yes-men of investing.
These biased buddies can lead you down a treacherous path, blinding you to warning signs and alternative perspectives. So, beware of these sly companions and open your mind to diverse opinions!

Picture yourself stepping into the investing arena wearing a superhero cap. That's the essence of overconfidence bias — it tricks you into believing you're invincible. Armed with this false sense of superiority, you may take excessive risks, neglect diversification, and ignore expert advice. Be humble and approach investment decisions with a healthy dose of scepticism.

Have you ever found yourself swept up in a crowd, following the herd without questioning why? In the investing world, this phenomenon is known as herd mentality. But beware this blind allegiance can lead to overvaluation during market frenzies and undervaluation during panic-induced sell-offs.

Imagine a ghost that haunts your investment decisions, whispering reminders of past losses and making you tremble at the thought of future ones. That ghost is none other than loss aversion bias. It amplifies the pain of losses, making you cling to sinking investments in hopes of recovering what's gone.

Have you ever been held captive by a number, unable to see beyond its grasp? Anchoring bias loves to play this trick on investors. It anchors your decisions to a specific reference point, such as the purchase price of a stock, blinding you to changing circumstances and new information.