Biases That Drag Down Performance in Investing

Biases That Drag Down Performance in Investing

The importance of behavior is one of important aspect of investing that older adults tend to overlook. Instead, senior tend to focus on forecasting, timing, speed, intelligence, and many other things that they believe are more important in the returns they earn. Of course, some of these things matter in investing, but not as much as you hope and don’t forget¬†United Healthcare Medicare Advantage Plans 2020 @¬†

Senior citizens form part of the population that has been hardwired over hundreds of years with quick natural responses that boosted our survivability. Instead of thinking things through, we normally leap to the first conclusion. This usually works great when we are in some dangerous situations, but works terribly when we are trying to succeed in the stock market. Even though your natural tendencies have some uses, these biases that make you leap to the first conclusion can drag down performance. And this is the main problem that seniors have when investing. Here are some of the biases that stand in the way of senior citizens who are trying to survive in the stock market.

  1. Conservatism bias

Many senior citizens are conservatives even in the world of investing. They tend to be very slow to change their minds whenever new information or new opportunities arrive. You need to be open-minded and ready to embrace change and grab new opportunities when they present themselves. That way, you will be more likely to be a successful investor.

  1. Myopia

This is a tendency to focus extremely on the short term. Avoid being myopic if you want to invest successfully. In business, there are short-term and long-term goals. You should focus moderately on both. Otherwise, you will end up missing out on great opportunities just because they present long-term benefits.

  1. Sunk cost fallacy

Human beings tend to let past costs like effort, emotion, time, or money to affect their current investing decisions. While this can happen naturally, you need to be aware of it for you to avoid it. Times and situations are different. The reasons for your past failure or success might not bring you similar results at the current times.

  1. Social pain

According to studies, many people, including senior citizens, find it very uncomfortable to go against the majority even if the view is obviously wrong. Going against the crowd tends to trigger emotional fear. Therefore, most people would rather do as the crowd does or suggests. This is why many older adults find themselves following the same investing rules and tendencies as the crowd even if the action is not promising.