Investing is more about managing emotions than knowledge.

More money is lost because an investor did not know how to mange emotions rather than investments.

In investing, we tend to have lots of bias which leads us to make very emotional decisions especially in a volatile market.

However, we can find ways to control our emotions, bias and even take advantage of situations.

Here are the common bias.

Bias 1 : Herd Instinct.
This leads to follow everyone else just because they are doing it. When markets are in a sell off mode and everyone is fleeing, there is an irrational decision to sell before more losses are made. Even if it is irrational, the fact that everyone is doing it makes it seem logical to follow.

Bias 2 : loss aversion (heads or tails)
We are very willing to make money but most of us are very unwilling to lose money. The first of sight of loss of money comes and we feel jittery about it. We should instead know what goes down on a highly diversified basis will always go up. In fact, down markets present good buying opportunity and bad selling options.

Bias 3 : recency bias
Based on our own experiences, mostly bad, we are paralyzed by fear and do not want to make decisions to move forward to plan to invest. Or because we had a great market last year and we want to chase that return. This blurs our perception of what might happen again.

Bias 4 : familiarity bias
We mainly invest in things we are familiar and comfortable with. For example, we stay in Singapore so we naturally will find opportunities in Spore. However, we might not be open to potentially better opportunities elsewhere because we have not heard about it or are comfortable with it.
If we look elsewhere in China, India, technology and small cap companies in Asia, we could find great opportunities that we might not have thought about.

Bias 5 : overconfidence
Most people think we are better investors than average. However, do not underestimate the sudden change of the market. We have seen traders who had consistently made money for 2 years in a row lose all of it and more in one single trade because they became overconfident.

Speak with your experienced investment advisor to have a conversation on how to control the avoid the above bias.