Ep 61: Cognitive Biases That Could Influence Your Retirement Planning
RetirementOn This Episode
Cognitive biases are fascinating, especially as it relates to money. Find out what these biases are and how to implement more rational thinking into your financial life.
Takeaways
Cognitive biases are widely accepted as something that makes us human. But every day systematic errors in our thought process impact the way we live and work.
On this episode, we’ll explain what these biases are and what classifies as rational thinking. See if you can identify if some of these biases are affecting you.
Self-Serving Bias: Our failures are situational, but our successes are our responsibility.
Are you an investing genius whenever your investment accounts are growing, but just a victim of a bad market whenever they’re shrinking?
Curse of Knowledge: Once we know something, we assume everyone else knows it too.
This can be a problem for some financial advisors. They might think that some facts are basic and obvious (because it seems second nature to them), and therefore fail to educate you as thoroughly as they should.
Dunning-Kruger Effect: The less you know, the more confident you are.
The more you know, the less confident you are. Rookie investors can sometimes learn just enough to think they know everything they need to know and then plunge ahead into the investing world with much more confidence than they should actually have. More seasoned investors know enough to know that there’s an awful lot that they don’t know.
Listen to the full episode or use the timestamps to jump to a specific section. Thanks for listening! We’ll be back for another show every other Thursday.
Confirmation bias is huge.
- Mark Silverman, CFP®
The Layout
0:58 – Self-serving bias
3:05 – Curse of knowledge
4:27 – Dunning-Kruger effect
6:52 – Naïve realism
8:25 – Confirmation bias
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