Data Driven Investor: How Biases Drive Your Investments – Discover Your Type!
Understanding how financial markets work is just half the battle of investing. Understanding yourself is the other half. And it’s a key component that many investors overlook.
By understanding how you think, it’s easier to avoid risks that you might have otherwise stumbled into. And it may make it easier to build a resilient portfolio that addresses your needs, and can build wealth over time.
Many investors start buying in a bull market. They’re attracted to the rising prices. And in a bull market, it’s easy to make money. That leads to overconfidence, which can lead to big losses. Investors who bought options, under the mantra that “stocks only go up” got burned in 2022.
At the other end of the spectrum, investors who have had some big losses tend to see those happening indefinitely. They underinvest at a time when there are bargains to be bought.
That leads to underperformance when the market trends higher.
Simply looking at where the overall market sentiment is can improve results substantially. Investors can take profits off the table when greed spikes. And they can buy when sentiment is negative.
That may mean sitting on an initial loss. Or taking money off the table while a stock is still going up. But it can also mean avoiding big losses. That turns average investors into great investors.