Confirmation bias
Also called: myside bias
The tendency to seek, notice and believe information that supports what we already think, and to dismiss what does not.
An investor who likes a company reads its good news closely and explains away its warnings. Writing down what would prove you wrong before you buy, and deliberately reading the opposing case, are the main defences.
Learn more in these lessons
- Loss aversion, confirmation bias and overconfidenceWhich mental shortcuts cost investors the most, and what can you do about them?
- Combining fundamental and technical analysisShould you use both fundamental and technical analysis, and if so, how?
- Comparing competing explanationsHow do you avoid believing the first story that explains a company's numbers?
- How to research a company from scratchWhere do you start when researching a company, and in what order?
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