1. Sticky First Glance Trap 🎯
2. Echo Chamber 📢
3. Sheep Leap Syndrome 🐑
4. Rose-Tinted Rear View ❤️🔥
5. Confirmation Bias 🔍
6. Sand-Head Stuffing 🏖️
7. Hindsight High-Five 🎲
8. Macho Mirage 💪
9. Placebo Effect ✨
10. Lone Success 🏆
11. Selective Perception 👓
12. Blind Spot Bias 🙈
At the end of the video, I’ll give you actionable steps you can start doing today so you can stop making terrible investing mistakes that keep you poor.
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Sticky First Glance Trap is the tendency to rely too heavily on the first piece of information seen (the "anchor") when making decisions.
This can lead to poor decision-making, such as holding onto assets too long due to an initial high price or missing out on opportunities by waiting for a return to that price.
"The first step to getting the things you want out of life is this: Decide what you want." - Ben Stein.
Importance of setting clear investment goals, cautioning against allowing initial impressions to cloud judgment and decision-making.
Echo Chamber Bias is the tendency to overestimate the likelihood of events based on their ease of recall. Prioritizing investments based on recent news or what's most discussed, rather than comprehensive analysis.
Study by Schwarz (1991): Demonstrated that participants rated diseases as more prevalent when they could more easily recall instances of them, highlighting how ease of recall influences perceived probability.
"It's not what we don't know that gets us into trouble. It's what we know for sure that just ain't so." - Mark Twain.
A warning to investors against overvaluing information that's easily recalled or widely discussed, which may not always be accurate or relevant.
The Sheep Leap Syndrome is a cognitive bias where individuals adopt beliefs or behaviors because they perceive that a majority of people do the same. This can lead to the uncritical following of trends and investment in assets simply because they are popular, without proper evaluation of their intrinsic value.
Solomon Asch's Conformity Experiments (1950s): These experiments showed that individuals would conform to the majority opinion even when it was clearly incorrect, highlighting the powerful influence of perceived social norms on decision-making.
"The person who follows the crowd will usually go no further than the crowd. The person who walks alone is likely to find themselves in places no one has ever seen before." - Albert Einstein.
This bias occurs when individuals favorably remember their decisions, ignoring or downplaying the negatives. In crypto, this might lead to holding onto losing assets due to a positive initial assessment.
In a study by Mather, Shafir, and Johnson (2000), participants showed a preference for previously made choices, a phenomenon that can impair an investor's ability to objectively reassess their portfolio.
"When we are stuck in a rut we are being invited to grow and expand." - Dana Arcuri.
Recognizing and reassessing poor investment choices is an opportunity for growth, rather than blindly justifying past decisions.
This bias leads individuals to seek, interpret, and recall information that confirms their pre-existing beliefs, potentially causing crypto investors to overlook critical, contrary data.
Nickerson (1998) provided a comprehensive review on confirmation bias, demonstrating its influence across various decision-making scenarios, including financial investments.
"The human understanding when it has once adopted an opinion draws all things else to support and agree with it." - Francis Bacon.
We have a tendency to seek out information that confirms pre-existing beliefs, potentially leading to a narrow view of investment opportunities.
The tendency to ignore negative information or warnings, akin to an ostrich burying its head in the sand. You might disregard bad news, leading to uninformed or delayed decisions.
Galai and Sade (2006) explored the ostrich effect in financial markets, finding that investors often avoid acknowledging losses, impacting decision-making.
"We cannot solve our problems with the same thinking we used when we created them." - Albert Einstein.
Talking about the danger of ignoring negative information, urging us to face realities and adapt their strategies accordingly.
Judging a decision based on its outcome rather than the quality of the decision at the time it was made. In crypto, this can lead to misattributing success to skill rather than luck.
Baron and Hershey (1988) demonstrated that individuals often evaluate decisions based on outcomes, neglecting the decision-making process's quality.
"Do not judge me by my successes, judge me by how many times I fell down and got back up again." - Nelson Mandela.
Encourages us to focus on the decision-making process and learning from it, rather than just the outcomes of their investments.
Overestimating one's own abilities, leading to greater risk-taking. Investors like us might overvalue our knowledge, leading to poor investment choices.
Moore and Healy (2008) highlighted the prevalence of Macho Mirage in various tasks, including financial predictions, showing it often leads to errors in judgment.
"The greatest enemy of knowledge is not ignorance, it is the illusion of knowledge." - Stephen Hawking.
A warning for investors against overestimating their own knowledge or abilities, which can lead to complacency and risky decisions.
Believing a crypto asset will succeed merely because you believe in it, similar to how a placebo works in medicine. This can lead to investing based on hope rather than evidence.
Not directly studied within financial contexts, but the placebo effect's principles can apply, where belief in an asset's potential overlooks hard evidence.
"Belief creates the actual fact." - William James.
Reminds investors that mere belief in an asset's potential, without solid evidence, can mislead investments.
Focusing only on the successes while ignoring the failures. Crypto investors might only consider the stories of massive gains, disregarding the more common losses.
Tversky and Kahneman (1974) also touch upon aspects related to Lone Success, where success stories are more readily available and memorable than failures.
"Success is not final, failure is not fatal: It is the courage to continue that counts." - Winston Churchill.
Consider both the successes and failures in the market, providing a more comprehensive view for better decision-making.
The tendency to see only what one wants to see, filtering out contrary information. In crypto, this might mean ignoring warning signs about an investment.
Hastorf and Cantril (1954) in their study on selective perception showed that individuals' desires and beliefs significantly influence their perception of facts.
"We see things not as they are, but as we are." - H.M. Tomlinson.
Be mindful of how personal biases may color their perception of investments, highlighting the importance of objective analysis.
The belief that you are less biased than others, which can lead to overlooking one's own cognitive biases in decision-making, including in crypto investments.
Pronin, Lin, and Ross (2002) found that individuals recognize biases in others more than in themselves, underestimating their own susceptibility.
"Everyone is a moon, and has a dark side which he never shows to anybody." - Mark Twain.
A reminder for investors to acknowledge and address their own biases, which can unknowingly influence investment decisions
Stay informed on market trends to prevent outdated decisions. 📊
Seek varied sources to avoid confirmation bias. 🌐
Perform your own analysis for informed decisions. 🔍
Reassess your portfolio to align with goals. 🔄
Look for information that challenges your beliefs. 🚫
Consider both pros and cons of investments. ⚖️
Analyze investments based on data, not emotions. 🧠
Get advice from experienced investors to reduce Macho Mirage. 💬
Implement strategies to manage risks. 🛡️
Base choices on research, countering the placebo effect. 📈
Understand not all investments will succeed. 🌟
Be willing to adjust views based on new data. 🧐
Identify and acknowledge biases. 🤔
Leverage tools for objective perspectives on decisions. 🔎
Evaluate the quality of your decisions. ✅
