Guilty of Shortcut Thinking? It Could Cost You
Everyone suffers from some form of cognitive bias — a kind of shortcut thinking. Some studies suggest that a person can be subject to over 1751 cognitive biases in their day-to-day decision-making. When it comes to financial planning and investments, cognitive biases can result in some costly blind spots or avoidable losses. To check if you are guilty of autopiloting your thinking, start by asking yourself how you go about making important decisions. Do you: Do your own research? Make a pros and cons list? Consult a friend, or an expert? Our brain tends to have certain cognitive biases, or ‘flaws in our reasoning’, which influence our judgment in terms of the information we focus on, how we remember decisions made in the past, or even the sources we rely upon for our research. A cognitive bias often leads to people deriving conclusions inaccurately, generally due to the misinterpretation of information. How do these findings affect the average person planning financial or investment go